23/10/2023 03:12 PM

KUALA LUMPUR, Oct 23 (Bernama) -- CGS-CIMB Research is maintaining its gross domestic product (GDP) forecast for Malaysia at 4 per cent for 2023 following “encouraging” growth data in the third quarter (3Q 2023).

The GDP rose 3.3 per cent year on year (y-o-y) in 3Q 2023 due to an increase in tourism-related activities and construction works, according to the government’s advance estimates.

CGS-CIMB said despite the normalised interest rate, spending activities have remained resilient as it believes that government intervention in “administered prices” and heavy subsidies should continue to promote consumption growth in the fourth quarter.

It also believes that the worst is almost over and expects the potential massive stimulus from China, likely to take place in late 2023, to improve global demand. “Furthermore, key exports such as electrical and electronics are slowly starting to show reliable signs of improvement,” it said.

CGS-CIMB said it has also maintained its consumer price index (CPI) projection at 2.8 per cent for 2023 and 2.5 per cent for 2024 pending further updates on the subsidy rationalisation measures.

Malaysia’s CPI rose 0.1 per cent month-on-month (m-o-m) and 1.9 per cent y-o-y in September 2023 versus 0.2 per cent m-o-m and 2.0 per cent y-o-y in August 2023 due to lower food and transport costs.

Commenting on the proposed lifting of the service tax rate from 6 to 8 per cent, CGS-CIMB said its calculations showed that items affected by the service tax increase form 7 per cent of total CPI weight, considering the numerous exclusions such as food services and telecommunications. “As a result, the tax hike may only boost annual CPI growth by 10 basis points,” it said.

Hong Leong Investment Bank Bhd (HLIB) noted that Malaysia’s headline inflation unexpectedly eased to 1.9 per cent y-o-y in September from 2 per cent y-o-y in August.

“The broader impact to overall inflation continues to be contained by the government’s subsidies on fuel prices. With headline inflation on a decelerating trend and advance GDP estimate showing a modest growth of 3.3 per cent, we maintain our view that Bank Negara Malaysia will retain the overnight policy rate at 3.0 per cent in its final Monitory Policy Committee meeting for this year on Nov 2,” it said.





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