KUALA LUMPUR: Malaysia’s domestic demand is projected to expand by 5.4 per cent in 2023, mainly driven by private sector expenditure which is forecast to grow by 6.1 per cent.
The Ministry of Finance (MoF) said continuous labour market improvement as well as sustained economic and social activities, particularly the tourism-related activities following the reopening of China’s border, are expected to support private consumption growth, albeit at a moderate pace of 6.1 per cent.
In its Updates on Economic and Fiscal Outlook and Revenue Estimates 2023 report released today, the MoF attributed the expected moderation in consumer spending to diminishing pent-up demand, given the dissipating effect from the special Employees’ Provident Fund withdrawal as well as lag effect from the increase in the Overnight Policy Rate.
Nevertheless, the government‘s measures to curb inflation and the Sumbangan Tunai Rahmah cash aid for the B40 household income group, as well as the special financial assistance of RM700 to civil servants and RM350 to government pensioners in January 2023 are expected to support household’s disposable incomes and stimulate private spending.
It said that public consumption is also projected to expand by one per cent on account of higher spending on emoluments, mainly due to the Special Additional Annual Salary Increment for civil servants.
The ministry added that private investments are anticipated to increase by 5.8 per cent, mainly in the manufacturing and services sectors, following the government’s efforts to enhance good governance, reduce the cost of doing business and facilitate faster investment approvals.
Various measures to enhance Malaysia’s competitiveness and the investment ecosystem are also expected to spur more quality investment and create high-income job opportunities.
The measures include the setting up of funds and incentives to support the wider adoption of digitalisation, advanced technology, automation, green technology as well as environmental, social and corporate governance (ESG) practices among businesses.
“The government’s renewed focus on improving the capacity of micro, small and medium enterprises is also expected to provide further impetus in private investment growth,” it said.
Meanwhile, the public sector’s capital expenditures will continue to complement private sector investments, the ministry said, adding that the public sector expenditure is anticipated to increase by 2.5 per cent.
Major projects which are expected to kickstart in 2023 include the upgrading of the Klang Valley Electrified Double Track Project (KVDT) Phase 2.
The continuation of large-scale transportation projects like the Light Rail Transit 3 (LRT3), East Coast Rail Link (ECRL) and Johor Bahru–Singapore Rapid Transit System (RTS Link) will also boost public investment.
Overall, public investments are expected to increase by seven per cent in 2023.
MoF added that the gross national income (GNI) at current prices is expected to grow at 5.8 per cent in 2023 in line with the moderating economic growth.
Meanwhile, the gross national savings (GNS) and total investment are expected to account for 25.4 per cent and 22.4 per cent of the GNI, respectively.
The savings-investment gap is expected to continue to record a surplus of RM55.2 billion or three per cent of GNI, which will allow the country to finance investment primarily from domestic sources, it said. – BERNAMA
