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A. WORLD ECONOMIC OUTLOOK UPDATE
GLOBAL GROWTH STILL GROWING AMID MULTIFACETED RISKS
- Global economy maintains momentum, albeit moderate in 2024. The global economy is expected to grow at a decent clip in 2024, supported by domestic demand and a gradual improvement in global trade activity. The International Monetary Fund (IMF) raised its forecast for global growth to 3.2% (from 3.1% and 2.9% previously) in 2024, though it is still below the average global GDP growth of 3.8% pa in 2000-2019.
- With global headline and core inflation readings falling though remain a distance from major central banks’ inflation target, the rate cut is on the horizon going forward. The central banks are waiting for more confirmation of price data before cutting interest rates. The central banks officials want to “feel more confident” that inflation is heading towards the central bank’s target
- Risks remain skewed to the downside. The global growth outlook remains subject to downside risks, mainly from an escalation of geopolitical conflicts in Ukraine and the Middle East, higher-than-anticipated inflation outturns, the US Presidential election and volatility in global commodity and financial markets.
B. MALAYSIA ECONOMIC OUTLOOK UPDATE
POSITIVE SIGNALS AMID DOWNSIDE RISKS
- The Malaysian economy started the year 2024 in a positive direction, albeit a mixed performance. The Department of Statistics Malaysia (DOSM)’s advance estimates indicated that real GDP increased by 3.9% yoy in Q1 2024 (3.0% in Q4 2023), supported by the services and construction sectors and a turnaround in the manufacturing sector. The growth outlook remains subject to downside risks.
- Global leading and forward indicators suggest continued global growth, albeit still moderate. The International Monetary Fund raised its forecast for global growth to 3.2% (from 3.1% and 2.9% previously) in 2024. However, it is still below the average global GDP growth of 3.8% pa in 2000-2019. Some central banks have begun to lower interest rates as global inflation has fallen.
- Our tracking of high-frequency indicators provides a good head start for the year, albeit a weak reading in February, partly due to seasonal festive effects. But, we must keep vigilant about both external and domestic risks, which are roughly balanced. External risks may come from weaker-than-expected external demand, larger declines in commodity production and the escalation of geopolitical conflicts, especially in the Middle East. Meanwhile, domestic risks to growth could come from weaker domestic consumption and slower implementation of existing and new projects.