The economy is benefitting from a potential turnaround in external demand, the credit rating agency said in a statement in conjunction with its Economic Outlook 2024 report released today.

“Resilient domestic demand, supported by benign inflation and interest rates would also propel growth momentum,” it said.

On the fiscal side, RAM Ratings estimated the fiscal deficit to clock in at 4.2% of GDP in 2024, reflecting the fiscal consolidation path of the government.

It noted that the narrower deficit, down from an estimated 5% this year, would mainly be driven by a lower subsidy bill, better management of other operating expenditures, and higher tax revenue collections from an upside in economic conditions next year.

“However, with a need to fund critical development projects, government debt will remain relatively sticky at RM1.3 trillion in 2024 (62.7% of GDP) and debt servicing not insignificant at 16.1% of total projected revenue in 2024,” it said.

RAM Ratings said risks on the horizon for Malaysia’s growth will hinge largely on the global economy successfully achieving a “soft landing” and avoiding further escalation of geopolitical conflicts.

It said a spike in global food and commodity prices could pressure domestic demand, as it would bring unintended price ripple effects if the retargeting of RON95 subsidies were poorly executed.