Malaysia's GDP will slow in 2023.

Malaysia's economy would weaken in 2023 as a result of tough external conditions and slowing domestic demand, experts said on Thursday.

According to Xinhua, Maybank Investment Bank Research predicts Malaysia's full-year growth to drop to 4% in 2023 from 8% in 2022, owing primarily to a slowing in domestic demand.

According to the research firm, private consumption will increase at a slower pace next year as pent-up spending from the complete economic re-opening evaporates, compounded by the effects of high inflation and high interest rates on the cost of living and real disposable income.

It also expects public consumption growth to moderate, in accordance with the lower government operating expenditure allocation in Budget 2023.

Furthermore, it stated that the projection for weaker global economic development resulted in a decline in goods and services exports and imports.

Meanwhile, MIDF Research foresees Malaysia's gross domestic product (GDP) growth to reduce to 4.2 per cent for 2023 principally due to deceleration in external trade performances as a result of slower global demand.

"We predict the global economy to face slowdown rather than recession for next year. Demand conditions in the United States and the European Union will deteriorate next year as a result of increased interest rates and elevated inflationary pressure, according to MIDF Research.

According to the research firm, Malaysia's real exports growth will decelerate to 2.8 percent in 2022, down from a predicted 12.5% in 2022, aided in part by higher service exports due to increased tourism activity.

However, it believes Malaysia will continue to benefit from commodity exports, particularly palm oil, petroleum, and liquefied natural gas (LNG), as average crude palm oil (CPO) and Brent crude oil prices are forecasted to remain elevated at 3,500 ringgit ($794) per tonne and $96 per barrel respectively for next year.

According to MIDF Research, the Malaysian domestic economy will be powered by continued strong consumer spending, increased tourism-related activity, and the resuscitation of infrastructure projects.

According to Affin Hwang Investment Bank, Malaysia's open economy will be badly impacted by global growth slowing and has lately reduced its 2023 GDP predictions to 3.7 percent from 4.7 percent earlier.

While a global slowdown will have an influence on Malaysia, the research firm believes that a recession is unlikely due to the country's solid labor market fundamentals and a steady rebound in tourism-related industries.

It, however, opined that Malaysia may have to deal with a jump in cost of living, should there be a solid commitment from the government to strengthening its fiscal situation and addressing sovereign rating agency concerns.

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