KUALA LUMPUR, Aug 19 ― Analysts have projected Malaysia’s economy to expand between 4.0 and 4.3 per cent for 2023, and have mixed views on the overnight policy rate (OPR) following the slower-than-expected gross domestic product (GDP) growth in the second quarter (2Q) of the year.

Yesterday, Bank Negara Malaysia (BNM) announced that the Malaysian economy grew moderately at 2.9 per cent year-on-year (y-o-y) in 2Q against 5.5 per cent y-o-y in 1Q, weighed mainly by slower external demand.

Despite the slower growth, BNM governor Datuk Abdul Rasheed Ghaffour was optimistic that the country’s economy remains on track to achieve the targeted growth of four to five per cent this year, backed by the labour market’s continued recovery, implementation of projects and rising tourism activities.


RHB Bank Bhd economist Chin Yee Sian and associate research analyst Wong Xian Yong said the 2Q GDP was weaker than the Bloomberg consensus estimate of 3.3 per cent y-o-y and their in-house forecast of 3.5 per cent y-o-y, as the modest 2Q growth was dragged by weakness in external demand, coupled with normalisation of consumer spending on the domestic front.

Hence, they revised their 2023 GDP growth forecast to 4.3 per cent y-o-y from five per cent y-o-y earlier, as they expect the moderation in consumer spending to continue in 3Q 2023.

“Contraction in export data on a y-o-y basis is likely to be extended into 3Q 2023 as well,” they said in a note yesterday.


On the OPR prospects, Chin and Wong anticipated that BNM would keep the benchmark rate unchanged at three per cent during its September monetary policy committee (MPC) meeting, given the weakening economic momentum.

“Our 2023 peak OPR forecast is maintained at 3.25 per cent, with the balance of risk tilting towards three per cent,” they said.

Meanwhile, MIDF Research kept its 2023 GDP forecast at 4.2 per cent y-o-y, as it expects the strength in domestic demand to be the main driver for the growth.

“Looking at the continued rise in domestic spending, we opine that the expansion can be sustained in the second half of 2023 given positive labour market conditions, growing income growth and supportive as well as accommodative economic policies,” it said.

In addition, it said that recovery in the tourism sector and tourist spending would also help to support growth in retail trade and consumer-related sectors, such as food and beverages (F&B), hotels and accommodation.

AmBank Group, however, revised its 2023 GDP forecast to four per cent from 4.5 per cent previously, as it anticipated slower trading activities for the remainder of the year, given the pessimistic economic outlook globally on the effect of the higher interest rates.

On the OPR, it believes that the rate is likely to stay at three per cent this year, given the persistent decline in inflation and the need to support domestic demand given external uncertainties.

On the ringgit against the US dollar, the group revised its year-end forecast to 4.50 versus 4.40 earlier on the back of the change in its 2023 GDP growth forecast and the “higher-for-longer” narrative to sustain the recent US dollar rally.

The ringgit-US dollar pair forecast revision is also due to the recent macro developments in China which may affect sentiment among emergency market currencies, it added.

The local note closed at 4.6465/6510 against the greenback yesterday. ― Bernama