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A. WORLD ECONOMIC OUTLOOK UPDATE
GLOBAL ECONOMY IS GROWING BUT RISKS STILL PREVALENT
- Global growth stays on the path. The lead indicators show continued and steady global growth in 2H 2024, supported by continued resilient labour markets and moderating inflation in some advanced economies, especially the US economy as well as a recovery in global trade, and exports on the back of an upturn in global technology cycle.
- Growth divergent in advanced economies. The US economy remains on a soft-landing path amid fears of recession risk on the back of disappointing July’s jobs data and the contraction of the ISM manufacturing in July for the fourth consecutive month. Headline inflation continues to ease closer to the Fed’s comfort zone. Economic and business activities in the euro area still growing unevenly amid stable unemployment rate and a marked improvement in inflation. In Japan, after registering a surprise economic contraction in Q1 2024, due to a temporary supply disruption linked to a major automobile plant, a modest turnaround in growth in 2H is expected, driven by stronger wage growth and consumer spending. The China economy unexpectedly slower than expected in Q2 2024, due to weak consumer spending while the property crisis continued to be a major drag. We expect the authorities to roll out support measures to stabilise growth in 2H 2024.
- Inflation has finally been tamed, with lower interest rates to follow. Global disinflation is a common theme, albeit the pace is slowing. Stubborn services and wage inflation resulted in bumps in path to lower inflation.
B. MALAYSIA ECONOMIC OUTLOOK UPDATE
DOMESTIC ECONOMY REMAINS ON THE EXPANSION PATH
- The Malaysian economy grew by estimated 5.0% in 1H 2024. The Malaysian economy sustained its expansion, underpinned by continued domestic demand and a turnaround in exports. Advanced estimates (based on April and May data) showed that real GDP expanded higher by 5.8% yoy in Q2 (4.2% in Q1), taking average growth to 5.0% in 1H 2024. This is better than market expectations.
- High frequency indicators point towards sustaining positive direction. In Apr-May, industrial production grew further by 4.2% yoy (3.3% in Q1), and the manufacturing output expanded by 4.8% (2.1% in Q1), leading to higher manufacturing sales growth of 5.6% (1.8% in Q1). The wholesale and retail trade growth also advanced further to 6.8% (5.4% in Q1). In the external sector, gross exports expanded by 5.8% in Q2 (2.0% in Q1), while imports of intermediate goods and capital goods increased strongly by 28.7% and 24.0%, respectively, in 1H 2024, indicating a robust private investment and production ahead.
- Economic momentum to continue in 2H 2024. We expect sustained higher growth in the manufacturing, services and construction sectors. Overall exports are expected to gain strong traction in 2H (+3.9% yoy in 1H 2024).