2Q GDP ESTIMATE SIGNALS POTENTIAL GDP GROWTH OF OVER 5.0 PCT IN 2024

By Nurul Jannah Kamaruddin 

KUALA LUMPUR, July 19 (Bernama) -- As economic indicators continue to paint a promising picture, optimism surrounding the gross domestic product (GDP) growth has surged with analysts believing that the economy could grow beyond the initial projections of 4.0-5.0 per cent this year.

This increased optimism stems from the estimated second quarter (2Q 2024) GDP growth of 5.8 per cent, which surpasses the market’s expectation.

bootstrap slideshow

 UOB Kay Hian Wealth Advisors Sdn Bhd’s GDP growth projection was one of the closest at 5.3 per cent,  according to its head of Investment Research, Mohd Sedek Jantan.

“We will revise our overall 2024 GDP forecast upon the release of the actual data. If the 2Q GDP indeed surpasses 5.0 per cent, we foresee Malaysia's overall GDP for the year to be within the range of 4.8-5.2 per cent,” he told Bernama.

Mohd Sedek attributed UOB Kay Hian Wealth Advisors’ higher 2Q GDP projection to the low base effect, building on the strong growth momentum seen in 1Q 2024.

bootstrap slideshow

“Several economic indicators support our optimistic outlook. Malaysia's Purchasing Managers' Index (PMI) data indicates a sustained recovery and upward trend in 2Q, with readings of 49.0, 50.2, and 49.9.

“The manufacturing sector exhibited steady output growth, bolstered by an acceleration in export-oriented industries, which expanded by 3.7 per cent compared to 2.6 per cent in April 2024,” he noted.

Malaysia's Industrial Production Index (IPI) also showed year-on-year growth of above 4.0 per cent in May and June, compared to 2.0-3.0 per cent from January to March.

He said the Leading Indicator (LI), which has increased for the fifth consecutive month, also suggests sustained economic growth and momentum.

The optimism on the 2Q GDP is also underpinned by the continued improvement in trade balance data from April to June, which stood at RM7.7 billion in April, RM10 billion in May, and RM14.3 billion in June.

“Foreign direct investments (FDI), particularly in data centres, have emerged as a key catalyst for Malaysia's economy this year, reinforcing our confidence that Malaysia's overall GDP for 2024 will meet expectations,” he said.

Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the economy has also essentially achieved full employment status, meaning that more people are employed and receiving a steady income.

“This would allow them to spend and contribute to the economy positively.

“We have also seen a sharp increase in construction growth, at a double-digit pace, giving us the impression that investment activities are picking up its pace,” he said.

Therefore, he believes that there is potential for GDP growth to exceed the 5.0 per cent level this year.

“As for monetary policy, I think the current stance is appropriate and therefore, we foresee that the overnight policy rate (OPR) could stay at the current level of 3.0 per cent.

“A possible hike in OPR is something we cannot rule out. But for now, it seems that 3.0 per cent is just about right for the economy,” he said.

Mohd Afzanizam added that overall, positive domestic data should support the ringgit as Bank Negara Malaysia is unlikely to reverse its policies.

-- BERNAMA