Kenanga Research has revised its 2023 gross domestic product (GDP) growth forecast for Malaysia upwards to 4.7% from 4.3% earlier as domestic demand is expected to remain resilient, supported by targeted expansionary fiscal measures, the impact of post – COVID normalization, China reopening, as well as the prospect that global economic slowdown may not be as severe as anticipated.

The research house said this year’s GDP is expected to grow moderately due to normalization in domestic economic activity, the impact of tighter financial conditions brought by the global central banks and the prospect of global growth slowdown amid elevated geopolitical risks as well as volatile commodity prices.

“However, domestic growth would remain supported by further improvement in the domestic labor conditions and a potential rise in wage growth, with the unemployment rate expected to return to its pre – pandemic level of 3.3% this year.

“This will be further bolstered by the resumption and realization of multi – year government projects as well as a sustained increase in tourist arrivals,” it said in a research note yesterday.

Kenanga Research said tourist arrivals expanded 12.9% month – on – month, reaching 1.2 million in September 2022, and are expected to gradually increase going forward due to further resumption of international tourism.

“Likewise, our forecast remains subject to multiple risks, mainly stemming from the external side, such as the development of the Russia – Ukraine tensions and Sino – American relations, as well as the prospect of recession in several major economies,” it said.

In view of the external headwinds and diminishing base effect, Hong Leong Investment Bank (HLIB) has also maintained its expectation for Malaysia to grow at a more moderate pace of 4.0% this year.

“Nonetheless, China’s recent reopening is anticipated to help push the recovery in tourist arrivals and lend some support to export growth. Domestic demand is also expected to continue to support growth, albeit at a more moderate pace, amid the continued gradual recovery in the labor market,” it said in a separate note.

For 2023, HLIB said Bank Negara Malaysia reiterated that the Malaysian economy would continue to be supported by domestic demand, underpinned by continued improvements in the labor market and the realization of multi – year investment projects.

“Risks to the outlook, however, remain titled to the downside, stemming from weaker global growth, tighter financial conditions, re-escalation of geopolitical tensions and supply chain disruptions,” it said.

– Bernama