KUALA LUMPUR: Malaysian exports, which started contracting year-on-year in April, are expected to be a drag on growth at least through to the fourth quarter (Q4) of 2023, said CGS-CIMB Research.
But domestic growth may remain robust, underpinned by a healthy labour market with potential tailwinds over the next six to 18 months as the tourism sector gradually normalises, it added.
CGS-CIMB said the potential drag will stem from the US entering a technical recession in Q4 and bottoming out of technology cycle at the end of 2023, if not later
"For investors concerned about further weakness in the ringgit vis-à-vis the US dollar, we would highlight that there is a decent upside to the current account from the normalisation in tourism receipts," the firm said.
Malaysia's tourism receipts amounted to RM28.2 billion in 2022, compared to RM86.1 billion in 2019, while last year's current account surplus stood at RM47.2 billion.
Therefore, CGS-CIMB said even though the current account surplus will likely ease to RM30.5 billion in 2023 from RM55.1 billion in 2022, there is room for a decent recovery in 2024 as the tourism sector normalises.
"The underlying strength of the domestic economy has helped to boost property sales, especially in good locations, where most of the developers under our coverage have the greatest exposure.
"As a result, unbilled sales have inched up, helping to improve visibility for the key developers."
CGS-CIMB said it is seeing construction companies grow their order books by expanding into overseas markets, tapping diverse private sector opportunities and still getting selected public sector work.
While margins were marked down in 2021-2022 due to the higher cost environment (when steel prices exceeded RM3,000-RM3,400 per tonne versus RM2,600 currently), contractors appear to be on a fresh slate now and should see some expansion in margins, it added.
"Hence, we see less downside risk to the estimates for construction companies. Overall construction gross domestic product also seems to have recovered following the significant drop during the Covid-19 pandemic," it said.
Source: https://www.nst.com.my/business/2023/07/932516/malaysias-exports-drag-gdp-domestic-growth-may-still-be-robust-cgs-cimb