KUALA LUMPUR: Malaysia's real gross domestic product (GDP) growth for the first quarter (Q1) of 2024 is expected to beat advance estimate of 3.9 per cent announced by the Department of Statistics on April 19 this year, some analysts said.
They also expect the full-year GDP to hit nearly 5.0 per cent.
Bank Negara Malaysia is due to release the Q1 2024 GDP number on Friday.
Maybank Investment Bank Bhd (Maybank IB) research team led by Suhaimi Ilias expects the country's economy to expand 4.2 per cent for the the January-March 2024 quarter.
This is based on firmer Industrial Production Index, Index of Services, construction works value and crude palm oil (CPO) output during the quarter.
"Based on these indicators, we estimated Q1 2024 GDP grew 4.2 per cent year-on-year (Q4 2023: 3.0 per cent YoY) versus the 3.9 per cent YoY advance estimate," Suhaimi wrote in a report, together with Dr Zamros Dzulkafli and Fatin Nabila Mohd Zaini.
They explained that Maybank IB's estimate is based on projections of faster actual versus advance estimate growth for services (4.7 per cent YoY versus 4.4 per cent YoY), manufacturing (2.1 per cent YoY versus 1.9 per cent YoY) agriculture (1.5 per cent YoY versus 1.3 per cent YoY), mining (6.0 per cent YoY versus 4.9 per cent YoY) and construction (11.5 per cent YoY versus 9.8 per cent YoY).
Economists contacted by Business Times believe that the positive trends in manufacturing, mining, services and CPO production signal a promising trajectory for the nation's economic future.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the manufacturing sector, which had been experiencing negative growth in the past two quarters, saw a resurgence with a 2.1 per cent increase in Q1.
Afzanizam said the mining activities also contributed positively to the overall economic growth, with the sector edging up by 5.9 per cent, compared to 3.7 per cent in the previous quarter.
This improvement reflects the sector's robust performance and its significant role in driving economic progress.
"Index of services also accelerated to 4.5 per cent from 4.1 per cent and the CPO production rose 3.4 per cent from 3.2 per cent.
"On that note, we are putting 4.0 per cent GDP growth for Q1 2024. It seems that the economy has performed favourably despite having to contend with higher cost of living, weak ringgit and heightened external uncertainties," he said.
Universiti Kuala Lumpur Business School economic analyst Associate Professor Aimi Zulhazmi Abdul Rashid said Malaysia is on the right track to achieve the targeted 4.0-5.0 per cent GDP growth for the year based on the department's early numbers of Q1 2024.
Aimi said on a quarter to quarter basis, the estimated number for Q1 would be much higher than the 3.0 per cent recorded in Q4 2023.
"International trade has also recovered positively, underlined by China, the biggest trading partner which recorded 5.3 per cent, battering the economists forecast of only 4.6 per cent," he added.
Centre for Market Education chief executive officer Dr Carmelo Ferlito said it is realistic to think about a 3.9 per cent growth for the first quarter (Q1) 2024, but the country needs to look at the micro foundations behind.
Ferlito pointed out ongoing issues in key sectors including manufacturing keeps on being quite sluggish.
"The same goes for agriculture. I think bigger reform efforts should be placed to re-launch both agriculture and manufacturing in Malaysia, as vital sectors for investments to unleash profit opportunities," he said.
Echoing the views, Putra Business School economic analyst Associate Prof Dr Ahmed Razman Abdul Latiff said Malaysia is on track to achieve this target.
"The growth will be continuously supported by the service sector, followed by the manufacturing sector and commodity sector," he said.
Economist Dr Geoffrey Williams said the Malaysian economy had had a slow start in the first quarter of 2024, but it may be revised upwards.
"If GDP growth is only 3.9 per cent in Q1 this year compared to 5.6 per cent in Q1 last year and also below the expected growth of 4-5 per cent, then there will need to be extra growth in the remainder of the year," he said.
Williams said this could come from a push to consumer expenditure from the Employees Provident Fund (EPF) withdrawals from Akaun Fleksibel and government spending.
"In a sense we will be buying growth from savers and taxpayers. Extra growth is needed for the government to meet the 4.0-5.0 per cent target otherwise it will be within our forecast of 3.0-4.0 per cent like last year," he added.
Hong Leong Investment Bank Bhd (HLIB), meanwhile, adjusted its GDP estimate for Q1 to 3.9 per cent from 3.8 per cent. This would have been spurred by stronger performances in most sectors, especially services, manufacturing and construction.
HLIB maintained its expectations for Malaysia's economic growth to normalise upwards to 4.8 per cent, driven by favourable domestic demand and a rebound in global trade.
"The introduction of a flexible Employees' Provident Fund account in May 2024 and salary increase for civil servants in December 2024 are also expected to lift private consumption further, though the extent may be neutralised subject to pending subsidy reforms," it said.
HLIB said on the demand side, growth is expected to be mainly driven by private consumption and a recovery in export activity.
"We expect a pickup in the services sector, reflected by the stronger volume index of services showing in the first quarter of 2024 (1Q24) at 4.5 per cent year-on-year (YoY) driven by the acceleration in the business services and finance subsector.
"Growth was also propped up by the food and beverages (3.7 per cent YoY) and accommodation subsectors (12.0 per cent YoY) amid the continued rise in tourism activities," it added..
The bank noted that the construction sector is expected to experience higher growth, consistent with the surge in the value of construction work done.
The civil engineering and non-residential building sub sectors remained the two largest contributors to the overall value of construction work completed.
HLIB said private consumption is anticipated to remain a key growth driver due to a stable labour market and ongoing wage growth in the services and manufacturing sectors.
"This is evidenced by stronger retail sales in 1Q24 at 3.8 per cent YoY, compared to 4Q23 at 2.9 per cent YoY, which was likely boosted by festive activities. The recovery in export activity (2.2 per cent YoY; 4Q23: -6.9 per cent YoY) is also expected to support overall GDP growth," it noted.
