Malaysia’s GDP growth is forecast to slow to between 4-5% in 2023 from a forecast of 8.2% in 2022, according to RAM Ratings.

The rating agency stated Malaysia’s exports would be hampered by the global economic slowdown, whilst the prominent price pressures and tighter monetary conditions could affect domestic consumption.

“That said, domestic demand is expected to drive the economy as businesses and households climb out of the lingering shadows of the COVID-19 pandemic,” the agency said in a statement on Wednesday.

RAM added that the country’s broad, the diversified base would help to soften the blow against growth headwinds next year, The Star reports.

Furthermore, the rating agency said economic growth would be bolstered by more robust labour market conditions in 2023, with the average rate of unemployment forecast to decline to 3.5% from a predicted 3.8% in 2022.

It added that resolving issues surrounding foreign workers and supply chains may also provide further growth momentum.

Yet RAM went on to say that sharper-than-forecast deterioration in the global economy and/or domestic inflation are downside risks for 2023.

Moreover, the agency said Malaysia’s fiscal deficit could remain within 5.4% of GDP from a forecast of 5.8% in 2022 due to moderate commodity levels and subsequent subsidy expenditure.

“This estimate is still subject to the final formulation of subsidy rationalisation plans for key items, including petrol and electricity tariffs,” RAM continued.

In addition, government debt is expected to reach RM1.1 trillion in 2023, equating to 62.4% of GDP and debt servicing at 16.9% of total projected revenues for next year, from an estimated 15.1% figure for this year.