Looking ahead to 2024, Bank Islam forecasts Malaysia’s economy to expand by 4.7%, in line with official projections. This anticipated growth is expected to be underpinned by continued strong private consumption, a resilient labour market, government cash transfers, and an uptick in tourist arrivals. Investment is likely to sustain its upward trend, supported by ongoing infrastructure projects and construction developments. The rebound in net exports, previously constrained in 2023, is expected to make a positive contribution in the upcoming quarters, aided by the conclusion of the global semiconductor downcycle. Nonetheless, external risks such as a potential sharper global slowdown and geopolitical tensions could threaten these forecasts. Inflation is predicted to remain moderate at 2.7% in 2024, slightly higher than the 2.5% observed in 2023, indicating a well-managed inflationary environment facilitated by effective monetary policy measures. BNM has maintained the OPR at 3.00% since May 2023, navigating concerns over currency strength, inflation, and economic growth. The OPR is expected to stay stable through the end of 2024, signifying a consistent monetary policy stance. ECONOMIC OVERVIEW In 2023, Malaysia’s economy faced cautious optimism and complex challenges amid global uncertainty. Domestic demand, driven by increased household and government spending, supported the economy and created lending opportunities for Bank Islam. Export sectors like electronics and commodities performed well, offering potential for Bank Islam’s support through trade financing and other services. Government interventions sustained economic activity and indirectly benefited Bank Islam by providing a stable financial environment. Despite these positives, the Bank contended with an array of challenges: a global economic downturn, rising inflation, supply chain disruptions, and a depreciating Malaysian ringgit, all of which exerted pressure on trade and investment dynamics. As 2023 concluded, the Bank faced a more pronounced impact from the economic slowdown, testing its resilience and adaptability. Link to Risks: CR MR LR OR RCR The Malaysian job market is expected to improve in 2024 and 2025, propelled by positive domestic economic developments and a resurgence in external trade. This positive outlook is supported by recent labour force statistics, indicating unemployment rates have returned to pre-pandemic levels of 3.3%. Globally, economic growth slowed to 3.0% in 2023, amid challenging conditions characterised by stringent monetary policies and high inflation. Although global trade growth slowed, the reopening of economies and recovery in tourism activities partially offset the reduction in goods trade, allowing supply chain conditions to normalise. Malaysia’s economic performance in 2023, achieving a full-year growth of 3.7%, was impacted by reduced external demand affecting the manufacturing sector and a decline in services sector growth as post-pandemic spending normalised amidst rising living costs. However, government expenditure remained steady, contributing to economic stability alongside private expenditure, though at a more moderate pace. MALAYSIAN ECONOMY & OUTLOOK 44 Bank Islam Malaysia Berhad ◆ Integrated Annual Report 2023 Operating Environment
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