2 months ago
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KUCHING: MARC Ratings Berhad announced that Malaysia’s advance Gross Domestic Product (GDP) estimate for the second quarter of 2024 recorded an impressive growth of 5.8 per cent.
According to its statement, the growth had surpassed the consensus forecast of 4.7 per cent and significantly higher than the 4.2 per cent growth seen in the first quarter of 2024.
“The robust performance was primarily driven by the continued strengthening of the services sector, which posted a growth of 5.6 per cent compared to 4.7 per cent in the previous quarter.
“This marks the fifth consecutive quarter where the services sector has achieved growth of at least 4.0 per cent.
“The sector’s resilience is attributed to sustained growth in private consumption and notable improvements in previously lagging sectors such as agriculture and mining,” it said.
Given these positive developments, MARC Ratings Berhad has revised its GDP growth forecast for 2024 upwards to 4.8 per cent, from an earlier projection of 4.2 per cent.
It explained that this is due to the domestic headline inflation rising to 2.0 per cent in May and June, after hovering between 1.5 per cent and 1.9 per cent over the past eight months.
“This reflects the emerging impact of diesel subsidy rationalisation. Year-to-date inflation remains unchanged at 1.8 per cent, indicating a downside risk to our inflation forecast should the RON95 subsidy rationalisation be further delayed.
“Looking ahead, we expect inflation to increase in 2H2024 on robust consumer spending, geopolitical risks and higher shipping rates, but may come in at the lower end of our forecast range of between 2.5 per cent and 3.0 per cent in 2024.
“As such, the Central Bank of Malaysia (BNM) has maintained the policy rate at 3.0 per cent, giving the flexibility to raise or maintain interest rates, on the back of Malaysia’s economic resilience and contained inflation,” it said.
Following this, it also reported that Malaysia experienced a positive net foreign flow of RM0.2 billion in the first half of 2024, primarily due to government bonds.
It explained that in July, yields on Malaysian Government Securities (MGS), German bunds, and US Treasuries (UST) mostly declined.
“Despite the bullish local corporate bond market, it lagged behind MGS. Credit spreads remained tight, with limited room for further compression.
“In the same month, expectations for Federal Reserve (Fed) rate cuts rose to 2-3 cuts in 2024, up from 1-2 cuts anticipated in June.
“This shift was driven by a cooling U.S. labour market, with the unemployment rate reaching 4.1 per cent—its highest since the end of 2021.
“A deceleration in hiring and a continuing disinflationary trend in the U.S., evidenced by lower headline inflation and personal consumption expenditures index, also contributed to these expectations.”
Nevertheless, despite the positive growth outlook, it stated that several emerging risks to global growth warrant close attention.
“Weakness in the U.S. labour market could dampen consumption and slow growth. Additionally, lower-than-expected earnings in the tech sector have led to a stock market sell-off, raising concerns about the sector’s sustained momentum.
“Furthermore, China’s weak domestic demand may pose a challenge to the global economy,” it said.
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