According to statements made by analysts on Thursday, the economy of Malaysia will slow down in 2023 as a result of adverse external conditions and a slowdown in internal demand.
According to Xinhua news agency, the Maybank Investment Bank Research said in a research that it anticipates Malaysia's full-year growth to drop to 4 percent in 2023 from the growth prediction of 8 percent in 2022. This is mostly reflective of a moderation in domestic demand.
As pent-up spending from the complete economic re-opening evaporates next year, the research house anticipates slower growth in private consumption. This will be compounded by the effects of high inflation and high interest rates on the cost of living and real disposable income.
It also forecasts a slowdown in the expansion of private consumption, which is expected to be in line with the reduced allocation for government operating expenses in Budget 2023.
In addition, it was said that the forecast for slower global economic development results in a decline in the amount of products and services that are exported and imported.
In the meantime, MIDF Research forecasts that the growth of Malaysia's gross domestic product (GDP) will reduce to 4.2 percent for the year 2023. This is mostly due to a slowdown in the performances of Malaysia's external trade as a result of slower global demand.
We anticipate that the global economy will face a slower growth rate rather than a recession in the coming year. According to MIDF Research's analysis, "demand circumstances in the United States and the European Union will become less favorable over the course of the next year as a result of increasing interest rates and increased pressure from inflation."
It is expected that Malaysia's real exports growth will drop to 2.8 percent by 2022, down from the 12.5 percent growth estimate for 2022. This projection is partially supported by improving services exports given the expectation of more robust tourism activity.
It is anticipated that the average prices of crude palm oil (CPO) and Brent crude oil will remain elevated at 3,500 ringgit ($794) per tonne and $96 per barrel for the upcoming year. As a result of this, it is believed that Malaysia will continue to benefit from commodity exports, particularly palm oil, petroleum, and liquefied natural gas (LNG).
MIDF Research is also hopeful that the domestic economy in Malaysia will be powered by persistently enthusiastic consumer spending, further improvement in tourism-related activities, and resuscitation of infrastructure projects.
Affin Hwang Investment Bank, on the other hand, stated that Malaysia's open economy will be badly harmed by the global growth deceleration. As a result, the bank has lately decreased its GDP predictions for 2023 to 3.7%, down from 4.7% in the past.
Even though Malaysia will feel the effects of a slowdown in global economic growth, a research firm believes that the country is not likely to enter a recession. This is due to the country's robust labor market conditions as well as a steady recovery in industries related to tourism.
The report did, however, express the opinion that Malaysia might be forced to deal with an increase in the cost of living in the event that the government makes a resolute commitment to improving the country's fiscal position and resolving the concerns of sovereign rating agencies.
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