It said that following the lower year-on-year growth of 7% in the fourth quarter of 2022 against 14.2% in the third quarter, economic growth would decline further over the coming quarters.

“While we expect the economy to return to growth over the coming quarters (on a quarter-on-quarter basis), we believe that the pace of economic expansion will moderate significantly going forward as credit conditions tighten further and pent-up demand fades,” it said in a statement today.

“Moreover, the export outlook will likely weaken further on the back of a slowing global economy and as the semiconductor industry continues to be in a downcycle,” it said in the statement.

Fitch Solutions said private consumption growth is expected to slow to 5% this year from 11.5% in 2022 while gross fixed investment growth would slow to 2% versus 6.8% last year.

On the outlook, it said should the Russia-Ukraine war escalate and sanctions against Russia is tightened, it could lead to upside commodity price volatility and exacerbate the global shortage of key commodities such as oil and palm oil, of which Malaysia is a net exporter.

On the downside, it added, a global recession would lead to a further slowdown in trade activity, and with exports accounting for close to 74% of Malaysia’s GDP, this would have an adverse impact on headline growth, it added.