Malaysia's economy is projected to grow between four percent and 4.5 percent, according to Malaysian Rating Corporation Bhd (MARC). The growth is expected to come from faster project implementation under multiple development blueprints. However, sustaining private spending growth is challenged by consumer expectations of higher inflation due to the ongoing rationalization of subsidies. Inflation in Malaysia has risen to 1.8 percent in Q1 2024 from 1.5 percent in Q4 2023, and is expected to reach 2.5 percent to three percent due to the second round of inflationary effects from subsidy rationalization [cbe19fa5].
Recent economic data for Malaysia showed positive signs, with wholesale and retail trade growth accelerating to 7.5% in April. Malaysia's exports also posted strong growth at 7.3% in May [46d4be83]. The tourism sector registered higher growth in the first four months of 2024, but sustaining the rebound requires continued enhancement of tourism policies.
The Malaysian Government Securities (MGS) and US Treasury (UST) markets rallied in June, helping to stabilize the ringgit. MARC noted potentially higher government bond issuances in 2024. The market may reassess recent optimism over the progress of US disinflation. The Federal Reserve projects one rate cut and higher inflation in 2024 [46d4be83].
Bank Negara Malaysia is expected to keep the overnight policy rate unchanged at three percent for 2024. Global economic growth is expected to remain moderate in 2024, with the growth forecasts for advanced European economies remaining stable. The strength of the US economy may moderate the pace of policy rate cuts globally. Persistent mixed readings on inflation have led to reduced expectations of interest rate cuts [cbe19fa5] [97ac293d].