It said an upside to growth would emanate from the potential for faster project implementation under multiple development blueprints.

“However, sustaining private spending growth is challenged by consumer expectations of higher inflation due to the ongoing rationalisation of subsidies,” it said in a statement following the release of its Mid-year Macroeconomic Outlook 2024: Stable Global Growth in a Moderate Easing Cycle report.

MARC said while the tourism sector registered higher growth in the first four months of 2024, sustaining the rebound requires continued enhancement of tourism policies amid higher competition from Asean peers.

Besides this, it said Malaysia’s disinflationary trend has ended, although the inflation rate has remained relatively mild, with inflation in the first quarter of 2024 (Q1 2024) rising to 1.8% from 1.5% in Q4 2023.

“We expect inflation at 2.5% to 3% with the second round of inflationary effects from the subsidy rationalisation as such policies were designed in a manner that limits the extent of inflation variance,” it said.

Additionally, MARC said geopolitical uncertainties increase risks to inflation, alongside volatility in commodity prices and rising costs through the supply chain.

However, it opined that sustained inflation and growth in Malaysia should enable Bank Negara to keep the overnight policy rate unchanged at 3% for 2024.

MARC said global economic growth is expected to sustain a moderate level in 2024, with the growth forecasts for advanced European economies remaining relatively stable despite lingering weaknesses.

“The strength of the US economy may moderate the pace of policy rate cuts, potentially leading to a less synchronised global monetary policy easing, compared to some central banks in Europe that have already begun reducing rates.

“Persistent mixed readings on inflation, especially in the US, have led to the paring down of expectations of interest rate cuts,” it added.