Chapter 1: Economic, Monetary and Financial Developments in 2024

External sector remained resilient in 2024

Malaysia’s external position remained resilient despite continued challenges in the global environment. The current account balance registered a higher surplus of RM32.8 billion or 1.7% of GDP in 2024 (2023: RM28.2 billion, or 1.5% of GDP). This was supported by the continued surplus in the goods account as well as narrowing deficits in services and secondary income accounts amid a wider deficit in the primary income account. From the savings-investment (S–I) gap perspective, gross national savings grew faster at 3.9% (2023: -8.9%) to RM454.8 billion (23.6% of GDP), surpassing gross domestic investment which expanded by 3% (2023: -3.3%) to RM422 billion (21.9% of GDP), resulting in the slight widening of the S–I gap. The increase in domestic investment was mainly driven by higher growth in private investment (13.4%, 2023: 6.5%).

In the goods account, the surplus was lower at RM117.1 billion (2023: RM136.2 billion) as the rebound in exports was outpaced by the strong growth in imports. The recovery in exports (2024: 7.5%; 2023: -14.7%) was supported by the global technology upcycle and improved external demand. Meanwhile, the strong imports growth (2024: 10.7%; 2023: -12.5%) was driven by higher intermediate and capital goods. The higher growth of imports for intermediate goods was accounted for by the rebound in manufactured exports. Capital imports also grew strongly in tandem with robust investment activities. The services account registered a smaller deficit of RM13.9 billion in 2024 (2023: -RM43.2 billion) given improvements in most services components, and driven primarily by higher travel receipts at RM95.7 billion (2023: RM68 billion) amid higher tourist spending and arrivals of 25 million persons (2023: 20.1 million persons). Of significance, visa liberalisation for tourists from China and India provided a major boost to inbound tourism. Tourist arrivals from China and India accelerated by 123% and 68.7% respectively in 2024 (2016-19 pre-pandemic long-term average: 17.2% and 1.5% respectively).

In the income account, the primary income deficit widened to RM61.5 billion (2023: -RM52.9 billion). This was due mainly to higher investment income accrued to foreign investors in Malaysia following increased export earnings. The secondary income account recorded a smaller deficit of RM8.9 billion (2023: -RM11.8 billion), as the growth in receipts (17.4%, 2023: 45%) outpaced the growth in payments (6.3%, 2023: 19.2%).

The financial account improved, especially during the first half of 2024. In particular, there were higher deposit placements by foreign banks, primarily in the interbank market. This mainly reflected their liquidity management strategies. Overall for the year, the financial account recorded a lower net outflow of RM14.8 billion (2023: -RM15.5 billion). This was primarily attributed to larger inflows in other investment and direct investment accounts compared to the previous year, which partly offset the continued outflows in portfolio investments.

The direct investment account registered a net inflow of RM11 billion (2023: -RM0.2 billion). Of significance, net foreign direct investments (FDI) recorded an inflow of RM47.4 billion (2.5% of GDP; 2023: +RM40.4 billion, or 2.2% of GDP). This reflected the continued interests of foreign investors in expanding their production capacity in Malaysia. In particular, FDI inflows for the year originated mainly from Hong Kong SAR (39.9% of net FDI), Singapore (38.9%) and the United States (25.6%). From a sectoral perspective, foreign investments were mainly channelled into the services sector. This included the ICT services subsector (2024: +RM20.9 billion; 2023: +RM9.8 billion) amid strong ongoing investors’ interest in capital spending on data centres, as well as the finance and insurance subsector (2024: +RM7 billion; 2023: +RM13.3 billion). The manufacturing sector also continued to register an inflow of RM6.7 billion (2023: +RM6.5 billion), supported mainly by sustained capacity expansions, particularly in E&E. Malaysia continued to benefit from the ongoing global technology upcycle and firms’ strong interests to develop their digital infrastructure.

Direct investment abroad (DIA) outflows were lower at RM36.4 billion (-1.9% of GDP; 2023: -RM40.6 billion, or -2.2% of GDP), as subdued global investment sentiment amid external headwinds in the first half of 2024 affected Malaysian companies’ overseas investment. The sentiments improved slightly towards the second half of the year, resulting in a marginally higher DIA outflow compared to the first half of 2024. From a sectoral perspective, DIA in 2024 was mainly directed towards the services sector, particularly the finance and insurance, as well as transport and storage subsectors. Singapore (23.7% of net DIA), Indonesia (22.2%) and Thailand (8.8%) were the major recipients of DIA in 2024.

The portfolio investment account recorded a higher net outflow of RM84 billion (2023: -RM36.4 billion). This was due mainly to higher investments abroad by resident investors (-RM108 billion; 2023: -RM46.6 billion) in both equity and debt securities, which were mostly hedged. These outflows were partly offset by the larger acquisition of domestic equity securities by non-resident investors (2024: +RM22.7 billion; 2023: +RM2.5 billion).

The other investment account continued to register a net inflow of RM55.3 billion (2023: +RM25 billion). This was driven mainly by higher interbank borrowing and continued placement of deposits by non-residents into resident banks. Net errors and omissions (E&O) amounted to -RM2.2 billion or -0.1% of total trade during the year (2023: -RM33 billion or -1.3% of total trade).