KUALA LUMPUR: MARC Ratings Bhd has forecasted a firmer gross domestic product (GDP) growth for Malaysia at 4.2 per cent in 2024, reiterating its view of an anticipated recovery in the tourism and external sectors.
The rating agency said these sectors will provide a much-needed boost for the services and manufacturing sectors.
“Furthermore, the investment outlook for Malaysia is also expected to remain positive in 2024,” MARC said in a statement.
Malaysia registered a slower GDP growth of 3.0 per cent in the fourth quarter (Q4) of 2023 as growth in the services sector moderated to 4.2 per cent, and the manufacturing sector remained tepid at 0.3 per cent.
Consequently, the full-year 2023 GDP growth stood at 3.7 per cent from 8.7 per cent recorded in 2022.
On the local currency, MARC said the ringgit continued to weaken against the greenback in February, partly attributable to the broad dollar strength amid the prospects of a higher-for-longer interest rate environment.
Nevertheless, it said the ringgit has generally underperformed its regional counterparts against the dollar.
Thus, the ringgit’s weakness highlights the need for robust structural reforms to enhance Malaysia’s capabilities in foreign currency accumulation, MARC noted.
On bonds, MARC said the Malaysian Government Securities (MGS) market moved in tandem with the rise in US Treasury yields following the market’s pushback against the earlier expectations of more aggressive Fed rate cuts amid positive US economic data.
“Going forward, the shifting interest rate trajectory in advanced economies and the ringgit’s weakness may lead to extended periods of volatility in the local bond market,” MARC noted.
February saw a notable upswing in the domestic corporate bond market, witnessing a drop in yields for top-rated bonds across various categories.
The buoyancy in the corporate bond market, coupled with the inflow of funds into the equity market, hints at an overall optimistic outlook among investors.
Notably, the month witnessed a simultaneous decrease in corporate bond yields and an uptick in MGS yields, leading to a contraction in the spread between these well-rated corporate bonds and MGS, MARC said.
Moving on, MARC said Malaysia’s headline inflation remained steady at 1.5 per cent in January.
“We expect inflation to rise to 3.0 per cent in 2024, given the gradual rollout of subsidy rationalisation and other new tax measures, anticipated volatilities in commodity prices, and pressures from firmer domestic demand.
“Given the upside risks to inflation, uncertain Fed interest rate trajectory, volatilities in the ringgit and ongoing geopolitical tensions, Bank Negara Malaysia will likely adopt a data-dependent approach and hold the Overnight Policy Rate (OPR) unchanged in its next Monetary Policy Committee meeting on March 7,” MARC said.
