Malaysia’s economy resilient amid global challenges
21 May 2024
THE Malaysian economy is expected to continue its growth trajectory this year.
As Malaysia’s GDP forecast for 2024 projects a growth rate of 4% to 5%, key sectors such as technology and tourism are poised to significantly contribute to the nation’s economic resilience and expansion, despite ongoing global challenges like weaker external demand and geopolitical tensions.
Last Friday, Bank Negara Malaysia (BNM) announced a GDP of 4.2% for the first quarter of 2024 (1Q24), underpinned by stronger private expenditure and a positive turnaround in exports.
BNM Governor Datuk Shaik Abdul Rasheed Abdul Ghaffour said exports turned around to record positive growth after three consecutive quarters of contraction, particularly from electrical and electronics (E&E) exports which gradually improved in tandem with the global tech upcycle while non-E&E exports (mainly machineries, equipment and construction-related materials) remained robust given continued demand.
“Upside risks include greater spillovers from the global technology upcycle and more robust tourism activity.
“In addition, faster implementation of existing and new investment projects will also boost growth,” he said during a press conference on the 1Q24 GDP announcement at BNM last Friday.
Tech Sector Spurs Economic Growth
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the tech industry, especially the outsourced semiconductor assembly and test, continues to be a major growth driver.
“The tech sector has historically been pivotal, but with the advent of smart technologies requiring extensive microchip applications, Malaysia’s role in the global supply chain is increasingly crucial,” he told The Malaysia Reserve (TMR).
Meanwhile, Dr Shankaran Nambiar of the Malaysian Institute of Economic Research emphasised the minimal impact of global challenges on Malaysia due to strategic economic adjustments.
“The China+1 policy may work to our advantage, driving more investments into the country.
“Although global demand is not robust, a tech upcycle driven by demands in memory and non-automotive chips and new technologies like generative artificial intelligence is expected,” he said.
Sunway University economics professor Dr Yeah Kim Leng also highlighted the significant opportunities arising from global supply chain reconfigurations due to US-China trade tensions.
“Malaysia is benefiting from investments as companies diversify their production bases and supply chains.
“The tech upcycles, driven by the widespread use of chips in consumer electronics and industrial products, positions Malay- sia advantageously for sustained growth in the tech sector,” he said.
He added that areas like Penang, the Kulim High Technology Park, and the Johor-Singapore Special Economic Zone are witnessing significant investment inflows, enhancing their economic prospects.
On the impact of rapidly implemented investment projects, Afzanizam said the construction sector had seen remarkable growth.
“From a growth of 3.6% previously to a robust 11.9% in the first quarter alone, the sector’s progress has positive ramifications across manufacturing and services, including demand for materials like cement and steel, as well as professional services,” he said.
Robust Growth in Tourism
On the other hand, Tourism Selangor CEO Azrul Shah Mohamad reported significant gains in the state’s tourism sector.
Selangor recorded the highest GDP in Malaysia last year, with the tourism industry contributing 25.5% to this total.
“We welcomed 6.54 million tourists in 2023, a 46.4% increase from the previous year, driven by attractions in ecotourism, food, shopping and leisure,” he said.
Azrul noted that the Petaling district alone attracted 4.1 million tourists, showcasing the strong demand for diverse tourism offerings.
Meanwhile, Hulu Selangor’s tourist numbers soared by 358%, a testament to the growing appeal of ecotourism in the area.
On potential economic headwinds, Azrul detailed strategic measures to sustain growth.
“Despite global economic pressures, our local campaigns and targeted international marketing have kept Selangor as the most visited state.
“We’re also investing in sustainable tourism practices and leveraging digital technologies to enhance traveller experiences and maintain stability,” he said.
On a broader scale, Sarawak’s Tourism, Creative Industry and Performing Arts Minister Datuk Seri Abdul Karim Rahman Hamzah was optimistic about the sector’s recovery.
“With Covid-19 now behind us, we’ve witnessed a significant revival in tourism, not just in Malaysia but globally.
“Here in Sarawak, the trend is evident with an increasing number of visitors each year,” he said.
Sarawak is on track to exceed its target of four million visitors in 2024 much earlier than anticipated, thanks to effective marketing strategies and the introduction of appealing tourism products.
“We’re also preparing for major events like the Rainforest World Music Festival and international marathons, which have already started to attract a lot of interest,” he added.
He also expressed confidence in navigating potential economic headwinds.
“Challenges are part of the landscape, but with South-East Asia’s potential, along with markets like China, Korea and Japan, we are well-positioned to keep the tourism sector vibrant and thriving,” he said.
As Malaysia navigates a complex global environment, the concerted efforts in tech and tourism underscore the country’s adaptive strategies and potential for sustained economic growth.
Source: The Malaysian Reserve
