Recent QET

Recent QET

2023Q4 & 2024 Outlook: Malaysia's Policy Setting and Reckoning

11 January 2024

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  • Global growth was held up in 2023. The global economy has held up pretty well in 2023, supported by the US economy, which has pulled off recession fears while China is falling below growth expectations after reopening, dragged down by debt and credit malaise in the real estate sector. These two economies’ decent economic outturn has outweighed uneven growth in Japan and a sharp slowdown in Europe.

  • Higher interest rates have tamed inflation but rates will stay high. While major central banks have paused their interest rate hiking cycles in recent monetary policy meetings, their narrative is keeping higher interest rates longer. Geopolitical tensions continue unabated; there is no end in sight for the prolonged war in Ukraine as well as a near-term truce in the Israel-Hamas war erupted recently; and de-dollarisation is gaining traction.

  • How is the 2024 global economic landscape shaping up? 2023 was a year of macro, market, and policy pivots; 2024 will be a year of reckoning as investors and markets begin digesting the lag impact of these dynamics.

  • We expect the global economy to slow to an estimated 2.7% in 2024 from an estimated 3.0% in 2023 as the lag impact of higher interest rates is fully felt in some advanced economies amid the weakening economic data.

  • What are the risks to the global economy in 2024? Geopolitical risks are always a wild card for the global economy, especially in the US Presidential election year in 2024. Elevated trade tensions between the US and China, the ongoing conflict in Ukraine, and the recent outbreak of war between Israel and Hamas in the Middle East could have a significant impact on the global economy, financial and commodities markets. Amid the softening of crude oil prices on oversupply concerns in 2024, the risks of geopolitical and climate change could induce a supply shock of commodities, energy, and food.




  • Amid slowing global economic growth and rising interest rates globally, the Malaysian economy has succumbed to the impact of declining exports and slowing domestic demand, growing by 3.9% in the first nine months of 2023. Headline inflation has moderated from the peak while core inflation also eased.

  • We estimate domestic economic growth to grow by 4.5% in 2024, aided by a recovery in exports and continued growth in domestic demand, albeit cautiously. Domestic demand will contribute 4.3 percentage points to GDP growth while exports of goods and services will contribute 1.4 percentage points. Both fiscal and monetary policies would remain supportive of the economy.

  • The 2024 Budget’s budgetary operations are expected to provide moderate fiscal support to the economy through a development expenditure allocation of RM90 billion. The fiscal deficit will reduce to RM85.4 billion or -4.3% of GDP in 2024 from an estimated deficit of RM93.2 billion or 5.0% of GDP in 2023. There were allocations for industrial development, green investment, road construction and maintenance, public infrastructure and utilities, flood mitigation projects, building of schools, and public housing development.

  • We expect Bank Negara Malaysia (BNM) to keep the Overnight Policy Rate (OPR) steady at 3.00% throughout 2024 amid there are upside risks to inflation as the government contemplates revising subsidies and price controls. BNM does not normally react to cost-pushed inflation unless it sets off demand pressures due to the wage-price spiral. The central bank is unlikely to loosen monetary policy as this might risk destabilising the Ringgit.


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