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,MARC Research remains cautiously optimistic over growth prospects in 2023 given the well-diversified nature of the Malaysian economy and its proven track record of withstanding shocks.

PETALING JAYA: Malaysia’s economic growth in 2023 is projected to moderate to 4.2%, due partly to an expected slowdown on the external front, which will dent export oriented manufacturing growth, according to MARC Research.

Other factors for the projected moderation are high-base effects, high cost of living, tighter monetary and financial conditions, as well as waning pent-up demand, said the research arm of MARC Ratings Bhd.

MARC Research remains cautiously optimistic over growth prospects in 2023 given the well-diversified nature of the Malaysian economy and its proven track record of withstanding shocks.

“We expect the country’s relatively well-developed infrastructure, competitive manufacturing and services sectors, and substantial natural resources to continue supporting growth and keeping the economy resilient overall,” it noted.

MARC Research forecast private consumption growth momentum to slow in 2023 to 5.1% (2022 estimated at 11.1%) even with expected gradual improvements in the labour market and consequently, nominal household disposable incomes.

The research unit pointed out that the high cost of living is extremely concerning, given not only the impact on vulnerable households but also the country’s continued dependence on private consumption growth as a growth engine.

MARC Research foresees downward pressure on private investment growth momentum in 2023 to 2.3% (2022 estimated at 5.7%).

Its expects inflation averaging out to 2.8% in 2023, at the low end of the central bank’s projected range of between 2.8% and 3.3%.

MARC Research said it is important to note that Malaysia’s pace of inflation remains manageable and Bank Negara continues to be unconcerned.

Amid the increasingly precarious global backdrop, risks to economic growth outlook are inevitably tilted to the downside.

“This could potentially reduce any propensity by the central bank to hike its overnight policy rate further,” it said.

The research outfit added the government’s subsidy bill to protect vulnerable groups is expected to remain elevated and shaped by political survival dynamics, it may possibly rise further.

It is also worth noting that studies have shown the absolute average income gap between the B40 group and the overall population had widened over the pre-pandemic 2009-2015 period.

According to a pre-pandemic study by Khazanah Research Institute, the consumption patterns of many in the M40 group had increasingly mirrored those of the top end of the B40 group.

“A shrinking middle class is a major concern because it will threaten economic growth and political stability,” said MARC Research.

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