In 2023, the Malaysian economy will moderate.

In 2023, the Malaysian economy would moderate due to tough external conditions and weakening internal demand, experts said on Thursday.

The Maybank Investment Bank Research stated in a report that it anticipates Malaysia's full-year growth to drop to 4% in 2023 from 8% in 2022, primarily due to a moderation in domestic demand, as reported by Xinhua news agency.

As pent-up spending from the full economic reopening evaporates and the consequences of high inflation and high interest rates on the cost of living and real disposable income intensify, the research firm anticipates slower increase in private consumption growth in the coming year.

Budget 2023 predicts a reduction in the rise of public consumption, in accordance with the lower allocation for government operational expenditures.

In addition, it was stated that exports and imports of goods and services are expected to decline as a result of sluggish global economic growth.

In the meantime, MIDF Research forecasts that Malaysia's gross domestic product (GDP) growth will reduce to 4.2% in 2023, mostly due to a slowdown in foreign trade results as a result of sluggish global demand.

We anticipate that the global economy will face a slowdown rather than a recession in the coming year. Demand conditions in the United States and the European Union will weaken next year due to rising interest rates and inflationary pressure, MIDF Research stated in its study.

According to the research firm, Malaysia's real exports growth is expected to decelerate to 2.8% in 2022, from an estimated 12.5% in 2022, aided in part by a rise in services exports due to the assumption of a more robust tourism industry.

Malaysia will continue to benefit from commodity exports, particularly palm oil, petroleum, and liquefied natural gas (LNG), as the average prices of crude palm oil (CPO) and Brent crude oil are expected to remain elevated at 3,500 ringgit per tonne ($794) and $96 per barrel for the coming year.

Additionally, MIDF Research is hopeful that the Malaysian domestic economy will be bolstered by persistently robust consumer spending, continued improvement in tourism-related activities, and resuscitation of infrastructure projects.

Affin Hwang Investment Bank, on the other hand, stated that Malaysia's open economy will be badly harmed by global growth deceleration, and as a result, has lately reduced its GDP projections for 2023 from 4.7% to 3.7%.

While a global GDP slowdown would touch Malaysia, the research firm believes a recession is unlikely due to the country's robust labor market and tourism-related businesses' steady recovery.

It opined, however, that Malaysia could experience a rise in the cost of living absent a concrete commitment from the government to strengthen its fiscal situation and address the concerns of sovereign rating agencies.