Summary 

• After successfully navigating through an environment of high interest rates to tame inflation in 2023, the global economy is expected to stay resilient amid the anticipated end of monetary tightening. However, challenges remain in the form of the lagged impact of previous rate hikes and the risk of inflation reaccelerating.
• The tightening cycle in the advanced economies may conclude in as early as 1H2024. With eurozone inflation to remain under control, the European Central Bank (ECB) may pivot first due to looming downside risks from prolonged tight monetary policy on its growth.
• We expect Malaysia’s gross domestic product (GDP) to pick up further to 4.0%-4.5% in 2024 (2023F: 4.0%), with a cautiously optimistic outlook on both domestic demand and the external sector. The turnaround in the global semiconductor downcycle, resilience in private consumption and positive investment environment will provide a much-needed boost in 2024, with the economic momentum hinging on the pace of recovery in China’s economy.
• Malaysia’s inflation is projected to trend around 2.5%-3.0% in 2024 (2023F: 2.8%), with the risk skewed to the upside due to the rationalisation of subsidies. Given the contained inflationary pressures, stronger ringgit, anticipated US interest rate cuts, Bank Negara Malaysia (BNM) is likely to keep the overnight policy rate (OPR) unchanged at 3.00% in 2024.