KUALA LUMPUR, Jan 16 — HSBC Group has projected Malaysia’s economic growth to be at a slower pace of 4 per cent this year versus the strong growth seen in 2022.

Chief Asia economist Frederic Neumann and co-head of Global Research Asia HSBC Group said that the 4 per cent growth is still a very robust rate.

He also expects Bank Negara Malaysia to raise the benchmark interest rate to 3.5 per cent in the second quarter.

"This is to keep on top of some of the lingering price pressures (that are) still coming,” he said during the virtual HSBC Asian Outlook 2023 press conference today.

He reckons Malaysia will be one of the key beneficiaries of the supply chain across Asia, with extraordinarily high amounts of foreign direct investment continuing to pour into the economy, expanding export capacity.

"Malaysia has also continuously benefited from higher energy prices and commodities in general.

"So (it will be) a fairly positive outlook for Malaysia even as growth slows to around 4 per cent,” he said.

He opined core inflation will likely remain sticky and high in the near term and, as such, HSBC has upgraded its average core inflation to 3.0 per cent for both 2022 and 2023.

"While Malaysia’s inflation remains the lowest in Asia, thanks to generous subsidies on petrol and food, inflation momentum has, nonetheless, accelerated.

"A large part of the inflation trajectory in 2023 will depend on the new budget, which Prime Minister Datuk Seri Anwar Ibrahim signalled may stay largely in line with previous announcements,” he said.

On the reopening of China’s economy, Neumann said China-Malaysia’s bilateral investments are expected to rise rapidly with more Chinese companies investing in the Malaysian economy, particularly in the manufacturing sector.

Meanwhile, head of equity strategy, Asia Pacific, Herald van der Linde anticipates the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) to hit 1,570 points in 2023, with the market expected to be in recovery mode this year.

"It is (a) much more stable market and does not fall as much as other markets despite our ‘underweight’ call for Malaysian equities for 2023,” he said.

As for Asia’s outlook, Neumann said 2023 will start off on a backfoot with global trade cycle and weaker economic growth challenges in China. Economic stabilisation will set in by the second quarter, led by domestic consumption and construction, driving economic growth back to five per cent.

"Tightening of monetory policy in response to rising inflation pressures across Asia is curtailing growth across the region as we head into the year of rabbit (2023),” he said.

He added that China’s reopening and the support for commodity markets will stabilise Asia’s economic growth this year. — Bernama