Asia/Pacific (ex-China/Japan) Outlook: Public Spending to be Catalyst

Our Forecasts

Source: Continuum Economics

Risks to Our Views

Source: Datastream

Regional Dynamics: Governments to Prop-up Growth 

As in 2022, emerging economies in Asia demonstrated their continued outperformance compared to other emerging markets and exhibited greater resilience compared to developed economies in H1-2023. It is anticipated that Asia will play a significant role in contributing to approximately 50% of global economic growth this year, with India, China, and Indonesia being major contributors to this growth. Notably, the emerging markets in Asia seemed to have navigated the challenges posed by the Russia-Ukraine conflict and its aftermath more effectively than their Western counterparts. These economies have been proactive in implementing prudent policy measures, including timely but measured interest rate hikes, and have sustained public spending to support their economic stability.

Inflation Turns Choppy 

While Western nations grapple with persistent inflationary pressures, Asian economies have managed to keep a lid on rising prices. Key economies in the region experienced a gradual easing of headline inflation in Q2-2023. Notably, countries such as India, Indonesia, Vietnam, Malaysia, and South Korea have all witnessed a decrease in inflationary pressures during this period (Figure 1). Australia too has witnessed an easing of price pressures as supply chain related concerns are seen dissipating. However, with inflation still high, Australia, it appears will remain on the monetary tightening path a bit longer than it other regional peers and we forecast one final rate hike in 2023.  

Figure 1: Consumer Price Inflation (% y/y)

Source: Datastream

In some of these economies, inflation reversed gains and trended upward over July-August (e.g. India), while frontier markets within the region, like Pakistan, have faced greater challenges. These economies have been adversely affected by the consequences of conflict, the surge in commodity prices, and their exposure to lending denominated in U.S. dollars. The recent uptick in some of these economies is mainly on account of higher food price. The threat of an El Nino related drought in Asia, and the potential impact on agriculture sector in these countries, has become a concern for governments. Given the high dominance of the food basket in the overall consumer price index in these countries, a slightly spike in food prices is often reflected in the headline inflation number. For instance, the recent surge in vegetable prices in India in July-August due to rain-affected supply chains led to inflation crossing 7% y/y rate. Similar trends was observed in South Korea, Vietnam and Indonesia. India’s decision to ban export of various varieties of rice too has hurt regional food prices. 

Although Q3-2023 is somewhat disappointing for Asian economies in terms of inflation, as several, including India and Indonesia, experienced higher-than-expected price increases, price pressures are expected to remain manageable, which is expected to be the trend going into 2024. A risk though to the benign inflation forecast stems from a tight oil market. With a cut in OPEC+ production to sustain over H1 2024, crude oil prices are likely to remain elevated and could prompt a price uptrend. Manageable inflation though has provided these economies enough headroom to assess market conditions and accordingly consider trimming interest rates.  

Figure 2: Benchmark Policy Rate (%)

Source: Datastream

The possibility of the conclusion of the tightening cycle in the U.S. will also grant Asian economies greater maneuverability. With the weakening of the U.S. dollar against major currencies, these nations are likely to witness inflows, providing a solid foundation for their currencies and offering support to the regional economy. However, even though some of these economies have managed to effectively control inflation, potential risks persist. Consequently, it appears that while monetary tightening may have ceased in some of these countries, authorities are expected to maintain a vigilant stance for at least another quarter. 

Public Spending Leading the Way 

With the threat of inflation persisting, consumer spending is likely to slowdown. Therefore, easing inflation may not necessarily indicate a firming of household spending in the near term. Thus, public spending will play a prominent role in shaping Asia's growth story for 2023 and 2024. Increased public expenditure, especially in light of upcoming elections in various Asian economies, will serve as a pillar supporting headline growth figures. Notably, both Indonesia and India are keen to avoid entering their 2024 elections amidst a backdrop of slowing economic activity. While private demand fueled economic growth in Asia in H1-2023, the first half also witnessed a substantial contribution from public investment in India and Indonesia.

India's government is anticipated to forge ahead with its ambitious capital spending plans, ensuring a surge in infrastructure projects in the lead-up to national elections. Similarly, populist policies in India and other countries like Malaysia will bolster household incomes and stimulate private demand. In India, the rural economy is expected to receive a cash infusion as elections draw near, with both central and regional governments rolling out initiatives to support farmers, offer incentives, and prioritize infrastructure projects. A comparable pattern is projected for Indonesia, which experienced a 10.6% y/y growth in government consumption expenditure during Q2-2023. With the government's state budget surplus rising by 36.5% y/y in the January-August 2023 period due to increased revenue, scope remains for pre-election fiscal stimulation. Indonesia has also allocated an additional $1bn for the construction of its new capital city.

Trade in Transition 

On the external front though, recent export data indicates a discernible trend of slowing growth. The slowdown was in line with our expectations and stemmed from a lack of demand from key export markets such as China, Europe and the U.S. (Figure 3). In the upcoming quarters, there is an expectation of the external stimulus waning further. This shift is anticipated as Western economies decelerate, and changes in consumption patterns occur, resulting in a weakening of growth in Asian economies. Despite sustained private sector consumption and capital spending, the decline in commodity prices and reduced global demand for these commodities will not be completely offset. However, a positive development for these countries is the steady recovery in the tourism sector, which may help mitigate some of the decline in goods export growth.   

Figure 3: Export Earnings Growth (% change value, y/y)

Source: Datastream, Reserve Bank of India, Bank Indonesia

India: Tailwinds from Government Spending 

Contrary to expectations, India’s economic activity levels posted strong growth in Q1 FY24, (Q2-2023). India posted 7.8% y/y real GDP growth during the quarter (Figure 4). Both government spending and consumer discretionary spend trended upward during the quarter despite prevailing high interest rates. However, private consumption is beginning to show signs of having normalized after surging in May as evidenced by choppy trends in passenger vehicle sales. Even so, tailwinds from high government spending over the coming quarters will offset any weakening that the private sector spending will witness. The second quarter economic activity in FY24 is expected to have dimmed slightly, owing primarily to the disruption caused by the erratic monsoon. First, the monsoon onset was delayed, and then the heavy rain onslaught disrupted agriculture sowing and supply chains. Several Indian states are reeling from the aftermath of incessant rains. Meanwhile, September rains appear weaker than average, which hints at weak agriculture performance this year. Nonetheless, India’s economic prospects remain bright. India is expected to see a boost from all the G20-related activity as well, the effects of which will linger over Q3-FY24. 

Figure 4: India GDP Forecast (% change, y/y)

Source: Continuum Economics, MOSPI

Government spending geared towards infrastructure projects particularly ports, airports, roadways and railways continues to provide a strong boost to economic activity. Government set an outlay of INR 10tn towards infrastructure development in FY24, sustained release of which over the coming quarters will ensure that economic activity levels remain buoyant. An 8% y/y growth in fixed capital formation and 6% y/y growth in private consumption drove growth in Q1-FY24. 

India’s other high frequency indicators such as industrial output growth, Reserve Bank of India’s consumer confidence index, purchasing manager’s index (an indicator of business sentiment) all suggest that the country is poised to record another year of strong growth. Additionally, festive spending over Q3-FY24 will also boost domestic activity levels. India’s real GDP growth is likely to come in at 6.6% y/y in FY24 and trend slightly lower to 6.4% y/y in FY25. 

Headwinds from a slowing external sector and the lagged effects of monetary tightening though are expected to take hold from early 2024, which will see India’s economic activity subside in the subsequent quarters. The risk of a recession in the West and a spillover from China on the global economy will weigh on exports. With Europe in recession, a key export market for India, and the government’s ban on specific commodities such as rice and sugar (allocated limited quotas), the external sector performance will be dismal. This is also likely to weigh on the local currency, the Indian Rupee as well in the near term. 

On the price front, the picture is volatile. Although the RBI’s tight monetary stance over the course of 2022-23 had seen inflation ease to below the 6% y/y target, food prices in recent months have spiked inflation again. India’s headline inflation rose to 7.4% y/y in July, before easing to 6.8% y/y in August (Figure 5). However, it continues to persist over the RBI’s upper target. The surge in food prices, which led to the uptick in inflation is expected to be transitory in nature though, and so, we expect inflation to average 5.8% y/y in 2023. Inflation will ease further to 4.5% y/y in 2024. The RBI’s primary mandate is to ensure price stability and therefore the focus will be on constraining price growth in light of rising price pressures. Furthermore, with the oil market expected to be tight in 2024 and owing to reduced supply from Russia at discounted rates, India will witness a price uptick from higher crude oil prices.

Figure 5: India Inflation and Policy Rate Trajectory (%)

Source: Datastream

What this means is that the Reserve Bank of India is likely to hold its interest rate stable at 6.5% level for longer now. The central bank continues to be vigilant for now, and will likely follow a cautious approach. Therefore, a rate cut is only likely in early 2024 now. The RBI will focus on ensuring that there is no runaway inflation. With the festive season looking upbeat, the RBI will not be worried about economic growth easing sharply. India’s credit growth too has sustained at double digit levels. Non-food bank credit growth in July was at 14.8% Yr/Yr indicating that despite the high interest rate of 6.5%, the business sentiment remains positive and credit off-take strong. Therefore, we anticipate three 25 basis point rate cuts in 2024, starting as early as Q1-2024, as inflation rotates lower again.

Risks to India’s growth forecast are tilted to the downside. The forecast of an adverse El Niño is the primary cause for concern. A potential slowdown in investment inflows as the global economy moderates alongside a slowdown in manufacturing is another risk that could dent India’s outlook in the near term. However, the government’s concentrated efforts to prop up the sector (to create both employment and make India the next global manufacturing hub) will partly offset the impact of the global slowdown. The government through its production-linked schemes is boosting investment in the sector, which saw Apple make a move to manufacturing iPhones in India. 

As seen historically, India will continue to be plagued with the twin deficits in its current and fiscal account, which will be a drag on the economy not only in 2023, but over the medium term. Having set an ambitious fiscal deficit target of 5.9% of GDP for FY24, the government is likely to overshoot on this front, in our view. The latest fiscal numbers suggest that the central government's fiscal deficit showed a substantial pickup, rising by 77.7% y/y to INR 6tn in Apr-Jul, with spending outpacing revenue collection.India’s tax collection in the Apr-Jul period accounted for about 25% of the budgeted target, whereas, expenditure so far amounted to 30.7% of the budgeted outlay. Given that this is a pre-electoral year, government outlay is expected to be high and exceed budgeted figures. Increased subsidies for fertilizers, the continuation of the free food grain scheme, low excise duty on crude oil, and heightened expenditure on populist policies leading up to the elections will make it challenging for the government to meet its target. Additionally, the weakening external sector will also impede the economy's progress. Shrinking external demand, coupled with the pressure on the INR resulting from a wide current account deficit, raises concerns. From a policy perspective though, policy continuity is expected. The country continues to be an attractive destination for foreign investment though, particularly because of the expectation of policy continuity. With Prime Minister Narendra Modi likely to be re-elected with a majority in 2024, the financial sector already anticipates another five year term with focus on infrastructure building and pro-business reforms.

Australia: RBA To Reach Terminal Rate of 4.25%

Domestic demand in Australia remains strong and has seen the slowing of Australian economy at a less magnitude than forecast. The solid labour market added to the strength of Australian economy despite peaking in early 2023 with wage growth at 3.6% y/y in June 2023. RBA laser focus on the balance of inflation and economic growth where they see headline inflation moderating along food and energy prices, while service inflation is more persistent. Yet, the room for further tightening to tackle inflation without hurting the economy is minimal as cumulative hikes have taken its toll towards Australian households. The household saving ratio fell further to 3.2% in September 2023 from double digits in the previous year, suggesting household spending will be restrained in the coming quarter. The rising mortgage rate put further strain on household balance sheets even when house prices have only fallen modestly from the peak. Negative real wage will continue to weigh on private consumption in 2023/24, as wage growth is outpaced by inflation but is expected to improve from Q2 2024. The re-opening of Australia has brought back international tourists and has been supporting private consumption, especially in the service area. The complication of Chinese economic activities in 2023 has concerned the RBA and potentially led to a revision lower in their global outlook. However, commodity prices are increasing in Q2 2023 as demand remain strong. Our central forecast is unchanged and believe the Australian economic growth will tread lower till Q3 2024 when we see RBA easing and household consumption fares better on more balanced real wage. 

Global demand for Australian commodity is strong despite the crumbling Chinese property development sector as other Chinese sectors are demanding more Australian iron ore. The demand is likely here to stay with the latest Chinese supportive policy slowly filtering into the economy. Australian trade balance is AUD 8,039Mn for July 2023 with export falling by 2% on lower non-monetary gold prices and import rising 2.5% from non-industrial transport equipment. The trade balance is expected to grow at a healthy pace in 2023 with Chinese demand recovering after the messy reopening and subsequent supportive policies, so as the demand for service industry will be steadier on inbound tourism. Overall, we revised GDP growth in 2023 higher to 1.9% and 2024 to 1.3% because the Australian economy is healthy enough to buffer the cumulative impact of tightening which would still inevitably hinder the Australian economic growth.

Inflation had peaked by year end 2022 and we forecast headline CPI to continue moderating throughout 2023/24 until a rebound in Q4 2024, but the pace of moderation will be bumpy for Q3/Q4 2023 as energy prices are set to rebound. Because of dissipating supply chain disruption and global monetary tightening, inflation for 2023/24 CPI has been revised lower to 5.5% and 3.2% respectively. RBA kept the inflation forecast unchanged and expects inflation to be back to target range in mid-2025. The transitionary inflation factors, for example high energy price triggered by Russia-Ukraine conflict and supply chain issues, has mostly dissipated yet it would take an extended period of time for sticky core inflation to rotate lower from such high levels. Yet, it will not be a smooth slope downhill as food and energy prices are showing a rebound in Q2 2023. Still, we see little room for food inflation to be sustainably higher. The high housing cost has corrected from peak levels with mortgage rate rising significantly and housing investment has also dropped from high levels but in the recent months we are seeing a rebound in housing price as demand outpaces supply. However, the potential fallout would still bind RBA’s hands from aggressive tightening in 2023. Wage inflation is being outpaced by inflation currently because the labor market has already been at maximum capacity. The RBA is recognizing the peak in labor market and slower than forecast pace of wage inflation, which may translate to lower inflation in a medium run. 

The RBA is keeping both doors open on holding and hiking rates as we can see how they acted differently in their forward guidance. They will continue to try to balance inflation and the Australian economy by tightening only whenever inflation spikes. It is wise for the RBA to be cautious with its tightening step as not only it takes time for the cumulative effect of hiking interest rate to feed into the system, but a potential crash in the housing market from aggressive interest rate increase would create more trouble for the central bank. And given the September statement citing higher inflation ahead due to rebounding energy prices, one could expect the RBA to deliver one final 15bps hike to 4.25% in Q4 2023 and then pause for assessment of cumulative tightening before bring rates down to 3.75% in Q3 2024. As inflation comes down further in 2025, we see the RBA moving back towards neutral policy rates and see 3.0% rates by end 2025.

Slowing growth and a peaking labour market does not overshadow the strength of Australian economy as demand stays strong. RBA’s number one goal remains in the balance of inflation and economic growth. While the Australian economy remains healthy, the room for further tightening to tackle inflation without hurting the economy is decreasing. The Q1 2023 household saving ratio fell further to 3.7% from double digits in Q1 2022 as domestic demand elks out some final strength, but with signs on household cutting discretionary spending. The rising mortgage rate also put a strain on household finances. Negative real wages are going to weigh on private consumption in 2023/24 as wage growth is still outpaced by inflation. The re-opening of Australia has brought back international tourists and has been supporting private consumption, especially in the service area. While private consumption would remain positive (given employment growth and some further decline in household saving rate), it is inevitable to weaken in the coming quarters. The recovery of Chinese economic activities should increase the demand for Australian exports but a portion of it would be neutralized by falling commodity prices. Our central forecast assumes that Australian economic growth would begin to slow in Q3 2023 before rebounding in Q1 2024 as the damage to household consumption would be limited by inflation slowing below wage growth and a H2 recovery in global  trade flows. 

 Australian trade balance is AUD 11,158Mn for April 2023 with export falling by 5% m/m on lower commodity prices and import rising 1.6%. However, the trade balance is expected to grow at a healthy pace in 2023 with Chinese demand being sustained after the quick reopening, while tourism helps services. Overall, we look for a moderating 1.7% GDP growth in 2023 and further slows to 1.2% in 2024, as the cumulative impact of tightening would feed through the economy and limit the Australian economic growth.

Inflation has peaked at end 2022 and we forecast headline CPI to continue moderating throughout 2023 with occasional hiccups before flattening out in H1 2024. Despite supply chain disruption having dissipated and RBA and global monetary tightening feeding through, core inflation remains sticky and we have revised 2023 and 2024 CPI higher at 5.9% and 3.3% respectively. RBA kept the inflation forecast unchanged in June by expecting inflation to remain above target range and only be back to target range in mid-2025. The transitionary inflation factors, for example high energy price triggered by Russia-Ukraine conflict and supply chain issues, has mostly dissipated yet it would take an extended period of time for sticky core inflation to rotate lower from such high levels. The high housing cost is correcting as mortgage rate have risen significantly, with housing investment having also dropped from high levels.  The potential housing fallout would still bind RBA’s hands from further aggressive tightening in 2023. Wage inflation is being outpaced by inflation currently, despite the labor market being at maximum capacity. RBA is recognizing the peak in the labor market and slower than forecast pace of wage inflation, which may translate to lower inflation in a medium run. 

The RBA is keeping both doors open on holding and hiking rates as well in the forward guidance. They will continue to try to balance inflation and the Australian economy by tightening only whenever inflation spikes and wait for the lagged effects of previous tightening to curtail core inflation. It is wise for the RBA to be cautious with its tightening step as not only it takes time for the cumulative effect of hiking interest rate to feed into the system, but a potential crash in the housing market from aggressive interest rate increase would create more trouble for the central bank. While a combination of aforementioned factors would underpin the inflationary pressure in 2023, the RBA would likely bring rates to 4.25% by year end 2023 before pausing to allow previous tightening be digested and assess inflation dynamics from there. As inflation comes down further in 2024, we see the RBA moving back towards neutral policy rates and see 3.0% rates by end 2024.

Indonesia: Sequential Slowdown Over Coming Quarters 

Indonesia has continued to surprise on the upside posting strong growth over H1 2023, prompting an upward revision to our real GDP growth forecast to 5.1% y/y. Investment, public spending and household consumption drove Indonesia’s strong economic activity levels, despite high interest rates. Firm household demand, as consumer price inflation remained manageable helped offset the fallout from a weakening external sector. However, looking ahead, the slowing global outlook, tighter liquidity conditions and subdued investor confidence will see spending patterns normalize. Retail sales growth has been choppy in recent months, contrary to Bank Indonesia’s consumer confidence index. Retail sales growth eased to 1.6% y/y in July and the central bank now expects the pace to moderate further to 1.3% y/y. This further supports our view of waning private consumption levels and retail sales over the remainder of 2023 and in 2024.

Meanwhile, a rapidly deteriorating external sector, as China witnesses some weakness and global trade slows will constrain income and investment over the remainder of 2023 and until mid-2024, in our view. The external sector is now becoming a point of concern, as export earnings have been contracting on a Yr/Yr basis over the past three months. Thus the trade surplus has been steadily diminishing (Figure 6). 

Figure 6: Indonesia Current Account (in US$ bn)

Source: Bank Indonesia

Although diminishing trade metrics are weighing on Indonesia, the country has been successful in curbing inflationary pressures. Bank Indonesia’s monetary policy moves have yielded the desired results. The central bank after having raised its interest rates by 225 bps over 2022 and early 2023, has held its main policy rate steady at 5.75% since. Bank Indonesia was one of the first few central banks in Asia to have opted for a rate pause, as a large trade surplus has provided Bank Indonesia with ample headroom until now to hold rates, as the currency, the IDR remained resilient. However, with the interest rate differential becoming low now as the Federal rate has risen further, and external sector weakens, Bank Indonesia (BI) will have to prop up the IDR. The expectation of a slightly longer rate pause in the U.S. too will see the BI hold interest rates for longer. 

Furthermore, while inflation trended downward over H1 2023, price pressures reversed the trend and rose slightly in August. Inflation came in at 3.3% y/y during the month, and has averaged 4.2% YTD (Figure 7). This was mainly on account of food prices, which gained pace for the first time in six months. The expectation of a drought caused by the El Niño is making BI and the government cautious. A tighter oil market given the OPEC+ decision to sustain production as lower levels, and lower exports from Russia to China and India is likely to drive up global oil prices, and this will be an additional price pressure on the economy. Overall though, we expect inflation to remain manageable and within the central bank’s target range. Inflation will average 4% in 2023, and moderate further as consumer demand wanes to 3.1% in 2024. 

Figure 7: Indonesia Inflation, Core Inflation and Main Policy Rate (%)

Source: Datastream

Following these dynamics, real GDP is expected to grow at 5.1% y/y in 2023, and then moderate slightly to 4.8% y/y in 2024. We expect a sequential slowdown in growth over the coming four quarters in line with diminishing consumption levels. It is noteworthy though, that rising government spending ahead of the upcoming elections in early 2024 will at least partially offset the fallout from the consumer spending slowdown. Further, as growth moderates, and higher borrowing costs hinder private investment, BI will likely cut rates. We expect a rate cut as early as Q1-2024. We expect a 25 bps rate cut in Q1 to 5.5%. Two further rate cuts of 25 bps each are projected over the remainder of 2024. Noteworthy is BI's expending mandate to include maintaining stability in payment and financial systems, which poses potential risks to price and exchange-rate stability. 

Indonesia's economic growth in the medium term is expected to remain resilient, although challenges lie ahead with risks tilted to the downside. A spillover from the domestic concerns in China will be a drag on the economy. Further, should the fallout from the El Niño be adverse or more than anticipated, agriculture output, particularly Indonesia’s key export commodity palm oil, is likely to be impacted over 2024 and beyond. While the external sector's contribution to growth may dwindle, a pick-up in investment cycle in H2-2024 is expected to counterbalance any negative impact. Another risk to the economy in the near term stems from pre-electoral instability, which often results in a drawdown of foreign investment. As the 2024 elections approach, policy continuity could become a concern which will likely see a dip in investment in early 2024. An upside risk is increased investment into Indonesia’s mining sector. The investment in these industries began in 2022, and after a slight lull in 2023, this is likely to pick up as interest rates decline over 2024. The implementation of the Omnibus Law on job creation will also stimulate investment through increased construction and mining activities in the medium term.

Malaysia: Rapidly Losing Momentum 

Unlike its other Asian peers, the Malaysian economy is unlikely to witness such strong levels of growth. Malaysia is facing a complex economic landscape marked by challenges and uncertainties. Despite initial optimism and government forecasts of 4-5% GDP growth, the latest projections indicate that Malaysia's growth prospects for the year will come in around the lower end of the range. The primary factor contributing to this is the muted outlook for external demand, coupled with skepticism about whether domestic demand can provide the necessary offset. Malaysia's economy heavily relies on exports, with approximately 70% of its GDP linked to foreign trade. Unfortunately, the external environment remains a significant impediment. Goods export values witnessed a decline of about 4.5% in Q2, mirroring a similar contraction in the preceding quarter. The challenges in the global electronics cycle, coupled with a generally unfavorable global trade outlook, are likely to persist, thereby hampering Malaysia's export earnings.

Additionally, higher interest rates in key Western export markets are expected to have a delayed impact on Malaysia's economy, potentially further dampening global growth prospects. China's subdued economic recovery offers little solace as it struggles to regain momentum, and domestic consumption stimulus efforts fall short. While domestic demand has demonstrated some resilience, it is unlikely to maintain this momentum. A temporary rebound in private consumption in Q1 2023, along with improved retail sales and employment figures, painted a more positive picture. However, the ongoing weakness in external demand is expected to trickle down to consumer spending and business investments. Consumer spending may lose its shine as wage growth and employment stall due to weak external demand. 

With inflation moderating and falling to 2.4% in June, coupled with weak economic activity, BNM is unlikely to implement further interest rate hikes in the near term. If the growth projections for this year prove accurate, there is a risk that BNM might shift its stance towards lowering interest rates in early 2024. We anticipate two rate cuts of 25bps each in 2024, which suggests a policy rate of 2.5% by end 2024. Inflation is expected to average 3% y/y in 2023, and decline further in 2024 to 2.2% y/y. Overall, economic activity will decelerate in the latter part of 2023 but is anticipated to experience a modest upturn in 2024, mirroring trends in critical export markets like the U.S. and China. Primary growth in the period spanning 2023 to 2024 will stem from domestic private consumption. Growth will average 3.5% y/y in 2023, and remain steady at 3.5% y/y in 2024. Persisting political instability (as the coalition government finds it challenging to pass legislation) will be a drag on the economy in the near term. However, Malaysia’s medium prospects remain bright. Foreign investors are expected to expand their operations within Malaysia's electronics sector as part of the broader regional supply-chain diversification efforts. The Madani Economy framework will serve as the cornerstone for numerous significant policy initiatives set to unfold in 2023. Specifically, the Industrial Master Plan will prioritize the growth and expansion of pivotal sectors while introducing measures aimed at bolstering small and medium-sized enterprises (SMEs).