Investment inflows, strong business confidence to support Malaysia’s GDP growth for 2024, 2025
11 Nov 2024
An increase in investment inflows, improved tax collection relative to Gross Domestic Product (GDP), and a narrower fiscal deficit are positive catalysts expected to drive Malaysia’s economy to grow between 5.0 per cent and 5.5 per cent in 2024 and 2025.
Malaysian Rating Corporation Bhd (MARC) chief economist Dr Ray Choy noted that total approved investments have averaged over RM300 billion – a significant increase compared to the period from 2015 to 2019 when this figure stood slightly above RM200 billion. “This represents a substantial rise in investments over time, reflected in the improvement in GDP growth and an increase in gross fixed capital formation, which indicates additional capacity building in the Malaysian economy,” he said during the virtual MARC360 Reflections: Analyses of Malaysia’s Budget 2025 and Post-Budget Debates event.
Choy further highlighted that Malaysia’s cyclical growth prospects remain strong, bolstered by a relatively elevated manufacturing Purchasing Managers’ Index (PMI) and improving business confidence.
“Malaysia’s PMI has improved. It’s not just about whether PMI is below or above 50, but about the cyclical improvements we’ve observed since the third quarter of 2023.
“This improvement is mirrored across business confidence in services, wholesale and retail trade, as well as in construction and industry,” he said.
In October 2024, the seasonally adjusted S&P Global Malaysia Manufacturing PMI remained unchanged at 49.5, with new orders rising for the first time since June 2024.
S&P Global previously reported that, while the index slightly trailed the neutral 50.0 threshold, it indicated a slight softening in business conditions over the month.
Choy added that global semiconductor trends have shown improvement, benefiting Malaysia as well.
On the fiscal deficit target, Choy stated that the fiscal deficit-to-GDP ratio has shown consistent improvement, with government expenditure as a share of GDP expected to decline due to reduced subsidies and the careful management of development expenditure.
“Malaysia is increasingly utilising public-private partnerships to drive development, effectively managing development expenditure even with a slightly reduced allocation.”
Commenting on the ringgit’s performance, he noted that the currency has performed well year-to-date, and Malaysia stands out for its GDP growth trajectory, which is slightly higher than pre-pandemic levels – an encouraging trend compared to other economies.
Source: Borneo Post
