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KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) expects Malaysia to grow at the lower end of the projected 4-5 per cent growth forecast, on slower consumer spending.
"A modest recovery in exports, the uptick in investments and the recovery in the tourism sector will continue to drive growth. A better second half of 2024 is expected as global monetary conditions ease," said president Tan Seri Soh Thian Lai in a statement.
He added the Malaysian economy is poised for an export-led recovery given that Malaysia's purchasing manager's index''s reading signalled that manufacturing activities have troughed and are on course for a gradual recovery.
"While the surge in intermediate imports foreshadows an export recovery, a tourism boom and a pick-up in investment momentum would add support. "Private consumption is expected to slow while inflation rebounds. Consumer spending likely would be more restrained in 2024, with the hike in the sales and service tax rate and the government subsidy rationalisation programme, which would exert pressure on inflation and the cost of living," said Soh.
He noted that the performance of the global economy in 2023 had surprised on the upside, exhibiting remarkable sustained resilience to sharp interest rate increases.
Beating the forecast made at the start of the year, the global economy expanded by an estimated 3.1 per cent, underpinned by a resilient economy posted by the United States. The risks to the global growth forecast are skewed to the downside, said Soh.
Among the factors that could slow global growth are tight monetary policy, slowing consumption and fiscal consolidation to rebuild budgetary capacity, resulting in less supportive fiscal policies. "While China's economic recovery is yet to fully gain traction, and Japan came close to a technical recession, delinquent real estate loans threaten to inflict major losses on US banks. "Other risks of note include climate events and rising geopolitical headwinds, with more relentless cyberattacks and ship seizure and attacks in the Red Sea, amid conflicts in Europe and the Middle East. "Given the current global economic scenario, the near-term policy challenge for central banks is to bring about a soft landing. This is a delicate and fine balance. While acting too soon may lead to an inflation rebound, waiting too long to ease may dampen the economy too much," he said.
Commenting on the ringgit, Soh said the local currency's exchange rate dropped to its lowest level of 4.8 in February this year against the US dollar (USD), the lowest since 1988, despite strong fundamentals.
Notwithstanding this, Malaysia's foreign reserves cover is adequate, while the current account balance remains in surplus. "A credit rating of A minus underlines its ability to meet its debt obligation. Hence, there is no need to peg the currency. "Developed markets central banks are expected to cut interest rates in the first half of 2024. The ringgit exchange rate will, therefore, end 2024 on a firmer footing," said Soh.
Source: https://www.nst.com.my/business/corporate/2024/03/1031113/fmm-economy-grow-lower-end-4-5pc-target-year-dragged-slower