| Rationale |
Summary
- The advance gross domestic product (GDP) estimate for Malaysia was positive, pointing to the economy’s better-than-expected performance in 2Q2024. The services sector continued to be robust on the back of sustained growth in private consumption, while previously laggard sectors such as agriculture improved. We have revised our 2024 GDP forecast upwards to 4.8% from 4.2%.
- The Malaysian Government Securities (MGS), German bund, and US Treasury (UST) yields mostly declined. However, equity market weakness, US election risks, and the Federal Reserve’s (Fed) rate cut expectations resulted in a volatile UST market. The local corporate bond yield decline trailed behind that of MGS; however, credit spreads remained tight.
- In July, market-implied Fed rate cuts increased to 2-3 cuts in 2024 (June: 1-2 cuts). The weak labour market as reflected in the unemployment rate being the highest since end-2021 at 4.1% (May: 4.0%), a slowdown in hiring as well as a continuing disinflationary trend further support an increase in rate cuts.
- Malaysia’s headline inflation rose to 2.0% in May and June, after hovering between 1.5% and 1.9% over the past eight months, indicating the emerging impact of the diesel subsidy rationalisation. Looking ahead, we expect inflationary pressure to increase in 2H2024, with continued robust consumer spending and higher shipping rates.
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