KUALA LUMPUR: Malaysia cannot escape the ripple effects from slower global economic growth, which will directly soften external demand and dampen the country's export performance, Harvey & Associates managing partner Harvindar Singh said.
Harvindar said there, however, was optimism that the domestic economy would see upbeat consumer spending, further improvement in tourism-related activities, as well as a revival of infrastructure projects and a vibrant services sector.
The services sector is expected to be the main contributor to 2023 gross domestic product (GDP) growth.
The sector will likely grow five per cent next year, followed by the construction sector (4.7 per cent), manufacturing (3.9 per cent), agriculture (2.3 per cent) and mining (1.1 per cent).
Harvindar said in 2023, Malaysia's economy was expected to expand by four to five per cent, slower than the anticipated GDP growth of 6.5-7.0 per cent in 2022, due to various external headwinds and tightening monetary policy in many economies.
"Measures taken by the government to trim frivolous spending will assist to cushion the impact of the decelerating economy. It is believed that Malaysia's political temperature has toned down with reduced uncertainties, improved market sentiments and expectations of a smoother implementation of policies," he told the New Straits Times.
Harvindar added that the stability of the unity government was key in order to focus on economic recovery and growth.
"The pace of the economic recovery is also dependent on other factors, including successful containment of the pandemic, support for the cost of living, and efforts in mitigating the downside risks, such as geopolitical uncertainties, global inflation and tightening financial conditions."
Meanwhile, Harvindar said the government's revenue was expected to decrease by 4.4 per cent in 2023 to RM272.57 billion from a growth of 22 per cent (RM285.22 billion) in 2022.
He said the Sales and Service Tax was expected to record RM32 billion or about 1.8 per cent of GDP.
"There are expected to be increased compliance checks by the Inland Revenue Board (LHDN) to safeguard and enhance the corporate tax collections. Non-tax revenue is expected at RM67 billion in 2023, declining by 23 per cent from 2022 due to lower dividends from government entities, particularly from Petroliam Nasional Bhd.
"Petroleum-related revenue is expected to contribute 21.6 per cent to total revenue in line with the assumption of lower global crude oil prices averaging at US$90 per barrel. Overall, the fiscal deficit is expected to be reduced to 5.5 per cent of GDP for 2023 from 5.8 per cent of GDP in 2022," he said.
