Malaysia 3Q23 & 2H23 Economic Outlook - 5 July 2023

Slower domestic growth on high base effect and rising external risks

Global growth is expected to moderate from 3Q23 onwards as cumulative rate hikes among advanced economies are anticipated to weigh on domestic demand. However, China’s economic recovery, and growth from other emerging economies will likely lend some support to the global growth outlook.

In 2H23, price pressures may continue to ease due to a slowdown in global economic activity, improvements in global supply chains, declining commodity prices and tighter financial conditions.

The US Federal Reserve (Fed) is expected to keep rates unchanged for the remainder of the year, despite recent hawkish rhetoric. Rate cuts are anticipated to commence in 1Q24. Meanwhile, the Bank of England (BoE) and European Central Bank (ECB) are likely to continue raising rates aggressively due to persistently high inflation. The Bank of Japan (BoJ) may soon adjust its yield curve control, while the People’s Bank of China (PBoC) is expected to further cut key interest rates to boost China’s struggling economic recovery.