Manufacturers federation says M’sian economy showed surprising resilience in first 6 months of 2024

KUCHING (Aug 29): The Malaysian economy has shown surprising resilience in the first half of this year, with the economy expanded by 5.9 per cent in the second quarter, up from 4.2 per cent in the first quarter, said the Federation of Malaysian Manufacturers (FMM).

FMM president Tan Sri Datuk Soh Thian Lai said this growth was driven by a strong export-led recovery, robust domestic demand, and a surge in tourist arrivals.

“This marks the highest growth rate since the first quarter of 2017, bringing the average growth for the first half of the year to 5.1 per cent,” he said in a statement.

According to Soh, the global economic landscape this year has been shaped by several factors including geopolitical conflicts, tight monetary policies, and a slowing Chinese economy.

Despite these challenges, he said the global economy, particularly the United States has shown remarkable resilience, adding that the US economy’s performance is crucial, as it will determine the future path of global growth.

“The Federal Reserve’s near-term policy challenge is to engineer a soft landing, balancing the risks of inflation and unemployment. Recent indicators such as the unemployment rate and retail sales, suggest a gradual cooling of the labour market, giving the Fed confidence to consider rate cuts later this year,” he said.

He predicted that China’s economy will continue to face challenges, particularly in the property sector, weak business confidence, and deflationary pressures.

He observed that China’s economy grew by 4.7 per cent in the second quarter, down from 5.1 per cent in the first quarter.

“With industrial output slowing and unemployment rising, China’s economic outlook remains uncertain unless the government ramps up stimulus efforts,” he said.

Soh pointed out that Malaysia’s economic growth had been driven by a robust export sector, with real exports up by 8.4 per cent in the second quarter.

He said this growth had been supported by strong demand for commodities, electronics, and petroleum products, adding that the manufacturing sector had also benefitted from capacity expansions and relocations, partly due to the US curbs on Chinese technology.

“For example, Infineon has opened a new semiconductor plant in Kulim, and Chery will start exporting from its new plant in Shah Alam by the end of the year,” he added.

Soh said private consumption spending exceeded expectations, growing by 6 per cent in the second quarter.

He said this was partly due to delayed subsidy cuts and new government policy measures such as the creation of a third Employees Provident Fund (EPF) account for immediate needs and emergencies.

Additionally, he said a pay rise for civil servants is expected to boost spending further.

He said private investments had shown robust growth, driven by multi-year infrastructure projects and the realisation of approved projects.

The tourism sector had also performed strongly, with tourist arrivals up by 28.9 per cent in the first half of the year, generating significant income for the country, he added.

“Inflation is expected to rise in the second half of the year, with Bank Negara Malaysia projecting a manageable increase within the official forecast of two per cent to 3.5 per cent.

“The ringgit has rebounded strongly against the US dollar, reaching an 18-month high and is expected to maintain an appreciating bias in the coming months,” he asserted.

Given the stronger-than-expected growth momentum in the second quarter, Soh said FMM Research had revised upwards the economic growth projection for this year.

According to him, the new forecast suggests that growth will likely exceed the government’s target range of 4 to 5 per cent, with a revised gross domestic product (GDP) growth of 5.1 per cent.

He said private investment and consumption spending have also been revised upwards, reflecting the economy’s strong recovery trajectory.

“Malaysia’s economy is on a robust recovery path, driven by strong exports, private consumption and investments. Despite global uncertainties, we expect the economy to continue its positive growth trend throughout the rest of this year,” added Soh.