Malaysia GDP growth meets target, expands 5.1% in 2024
Bank Negara attributes it to resilient domestic demand, robust investment activity and sustained household spending
[KUALA LUMPUR] Malaysia’s economy grew 5.1 per cent year on year in 2024, aligning with official advance estimates of 4.8 to 5.3 per cent. The growth was fuelled by strong domestic demand and a rebound in exports, said Bank Negara on Friday (Feb 14).
The final figure was an improvement from the revised 3.6 per cent growth recorded in 2023.
In the fourth quarter, gross domestic product expanded 5 per cent year on year, above the official advance estimate and economists’ forecast of 4.8 per cent in a recent Reuters poll. However, the growth moderated from 5.4 per cent in the previous quarter.
On a quarter-on-quarter seasonally adjusted basis, the economy declined 1.1 per cent, compared to a revised 1.9 per cent expansion in the third quarter.
Bank Negara attributed the economic expansion to resilient domestic demand, robust investment activity and sustained household spending.
The services sector remained the key growth driver, fuelled by consumer and business-related subsectors. The manufacturing sector continued to expand, led by electrical and electronics as well as primary-related clusters.
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The construction sector grew by double digits in 2024, while the commodities sector contracted due to lower oil palm and oil production.
Economic fundamentals remain healthy
Despite global uncertainties, Bank Negara governor Abdul Rasheed Ghaffour expressed confidence in Malaysia’s economic fundamentals, citing strong investment expansion, resilient household spending and improving exports as key strengths.
He cautioned that external risks, including economic slowdowns in major trading partners, heightened risk of trade and investment restrictions, and lower-than-expected commodity prices, could weigh on growth.
“Nevertheless, potential upsides to growth include greater spillovers from the tech upcycle, more robust tourism activities and accelerated investment project implementation could provide upside support,” he added.
Inflationary pressures remained contained in 2024. Headline inflation eased to 1.8 per cent year on year in Q4, down from 1.9 per cent in the prior quarter. Core inflation moderated to 1.7 per cent, from 1.9 per cent previously.
For the full year, the country’s headline and core inflation averaged 1.8 per cent, lower than 2.5 per cent and 3 per cent, respectively, in 2023.
Abdul Rasheed noted that while recent domestic policy reforms might exert some upward pressure on prices, the overall impact on inflation is expected to be manageable.
Outlook risks
Economists remain optimistic about Malaysia’s economic growth in 2025, projecting GDP growth between 4.5 and 5 per cent.
However, rising protectionism and geopolitical tensions pose risks to that outlook. RHB Research maintains its forecast at 5 per cent, while ANZ and OCBC expect 4.5 per cent growth.
Domestic demand is expected to remain the key driver, supported by resilient household spending, investment momentum and policy measures.
Lavanya Venkateswaran, senior Asean economist at OCBC, noted that solid domestic demand and moderating export growth were central to the economy’s performance.
ANZ Research economists, Arindam Chakraborty and Sanjay Mathur, said that there are signs of moderation.
They cited weaker imports of intermediate and capital goods, and noted that Malaysia’s declining manufacturing purchasing managers’ index signalled slower growth in new export orders.
RHB economist Chin Yee Sian added that uncertainties surrounding tariff policies and global supply chains could affect Malaysia’s role in China-centric trade networks.
She noted that strengthening ties with trade blocs such as Brics and Asean could help mitigate risks.
Meanwhile, Lavanya flags potential vulnerabilities stemming from Malaysia’s trade surplus with the US (US$15.9 billion in 2024), which could attract sector-specific tariffs under new US trade policies.
Ringgit outlook
The ringgit strengthened in 2024, appreciating 2.7 per cent against the US dollar, supported by positive economic fundamentals and ongoing structural reforms.
“The ringgit was one of the few currencies in Asia – aside from the Hong Kong dollar and the Thai baht – to appreciate against the US dollar in 2024; other regional currencies experienced a depreciation,” said Abdul Rasheed.
The ringgit gained against the currencies of Malaysia’s major trade partners, including the Singapore dollar, the won and the yen. On a nominal effective exchange rate basis, the ringgit appreciated 7.5 per cent in 2024.
However, in Q4, it weakened 8.1 per cent against the US dollar, in line with broader regional currency movements.
This was largely attributed to a stronger US dollar amid expectations of smaller Federal Reserve rate cuts in 2025, and increased investor caution due to policy uncertainties under the new US administration, he added.
As at 6 pm on Friday, the ringgit was trading at 4.4364 against the greenback, up 0.8 per cent from 4.4715 on Jan 1.
Against the Singapore dollar, it was trading at 3.3095, down 1 per cent from 3.2742 at the start of the year.
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