Summary

• Bank Negara Malaysia (BNM) projects the domestic economy to grow between 4% and 5% in 2024, aligning with the government’s estimate while highlighting a potential rebound in the manufacturing sector and a newly forecast contraction in the agricultural sector.
• Year-to-date exports grew by 3.9% in February, with an 11.0% increase in exports to the US counterbalancing a 4.0% decline in exports to China, indicative of the uneven recovery across trading partners. Malaysia’s Manufacturing Purchasing Managers’ Index (PMI) edged closer to expansion at 49.5, the highest level since September 2022.
• In February, cumulative net foreign outflows stood at RM9.0 billion, tracking the weakness of the ringgit and reversing 2023’s gain of RM5.6 billion. The ringgit experienced a minor appreciation in March on the central bank’s engagement measures to encourage foreign exchange conversions into ringgit by corporations and other institutions.
• After the US Federal Reserve (Fed) maintained the policy rate in March, Malaysian Government Securities (MGS) yields moved in tandem with a drop in US Treasury (UST) yields, reflecting expectations of rate cuts staying on track. Despite this, MGS yields remained relatively flat throughout the month as the market was initially spooked by higher US inflation. Meanwhile, German Bund yields saw sharper declines following slower eurozone inflation.
• The Fed raised its 2024 projections for economic growth and core inflation, and lowered its unemployment rate forecast. The market consensus priced in three rate cuts, aligned with the Fed’s dot plot median, though a robust economy and sticky inflation remain key risks to the interest rate outlook.