In a research note, the investment bank expects the manufacturing sector to gain momentum, as reflected by the pickup in manufacturing production in Q3 2024, as seen by the manufacturing industrial production index’s (IPI) 5.8% growth y-o-y.

“This was mainly due to the acceleration in export-oriented manufacturing activity of 5.3% y-o-y, underpinned by higher electrical and electronics (E&E) demand.

“Meanwhile, domestic-oriented manufacturing activity slowed slightly, but we expect growth in the construction sector to trend higher, in line with the improvement in the value of construction work done, mostly concentrated in civil engineering,” it said.

On the expenditure front, HLIB said private consumption is anticipated to remain supportive of overall growth, supported by a healthy labour market and higher wage growth in both the services and manufacturing sectors.

Nevertheless, it said the pace of expansion is expected to slow as consumers tighten their spending in response to the still high cost of living, reflected by the softer retail sales posting for the quarter of 4.1% y-o-y.

Pending the full Q3 2024 GDP print release, HLIB maintained its GDP forecast growth at 5% y-o-y in 2024 and 2025.

“We expect Malaysia’s economy to expand at a more moderate pace for the rest of the year in light of external vulnerabilities such as slower growth in advanced economies, uneven global manufacturing recovery, and ongoing geopolitical tensions.

“Nevertheless, growth is projected to be sustained by firm domestic spending, supported by a stable job environment and supportive income measures such as EPF’s Flexible Account 3 and civil servants’ wage hike in December,” it added.