KUALA LUMPUR, Jan 16 — Standard Chartered said it expects Malaysia's gross domestic product to pick up slightly to 4.8 per cent this year but the spending frenzy that had helped fuel a strong post-Covid rebound the last two years appears to be over as consumers brace for petrol subsidy roll-back and firms slow down hiring.

Pent-up savings from two years of lockdown cycles and Covid-19 stimulus drove consumers to splurge on goods and services after the world reopened, anchoring a strong economic recovery that had pushed firms to seek out more workers and push wages up.

The third-quarter job data, however, suggests employment may have peaked last year as hiring growth eased to 2 per cent in the third quarter compared to the previous year, the slowest pace in two years. Nominal wage growth also eased to 3.4 per cent at an annual rate, the lowest since Q3 2021.

"Remaining as a primary growth driver for Malaysia, consumer spending is expected to slow in 2024," the bank said in Malaysia Focus 2024 projections released today.


"Due to the removal of subsidies, consumer spending might be dampened. The Global Focus Report further states that although labour market conditions are robust, it may have peaked as employment growth eased to 2.0 per cent year-on-year in Q3 2023."

Edward Lee, the bank's chief economist on Asean and south Asia, said the slowing down in consumer spending could likely be offset by the bottoming of the electronics cycle — prices usually move upwards after "bottoming out".

"External demand could face challenges from the tight global monetary policy and subdued growth in China. However, we foresee that the bottoming out of the electronics cycle could provide some relief," he said.


China's economy is now reeling from an overheating property market that is threatening to unravel the republic's financial system as concerns rise over whether or not developers could repay their debt, fueling talks of a possible economic crisis.

Slower growth in the world's second-largest economy means there is less demand for Malaysian commodities and goods although Standard Chartered said Malaysia's export is still diversified enough to mitigate the effects.

China has become Malaysia's biggest export destination in the last few years and slowing exports was among the key reasons behind the ringgit's depreciation, Lee said.

Standard Chartered said it maintains a neutral view on the ringgit but expects the currency to benefit from possible US interest rate cuts expected by the second half of this year, as the US economy and inflation data show signs of easing.

"The current account should benefit from a further tourism recovery and the bottoming of the electronics cycle. The large accumulation of USD deposits by corporates may provide an impetus for MYR outperformance if USD weakness is sustained amid softer US economic growth," it said.