Five Percent Growth Predicted for Malaysia’s Economy This Year

Five Percent Growth Predicted for Malaysia’s Economy This Year

by April 3, 2019

The latest paper published by MIDF Research indicates that the medium term future is looking rosy for Malaysia’s burgeoning economy.

The Kuala Lumpur based research house predicts the overnight policy rate to hold steady at 3.25 percent into 2020 and also suggests that the nation’s current account surplus should mean the Malaysian Ringgit will maintain its value at around four dollars come the end of 2019.

This spells positive news for Malaysian businesses, but that is only half the story. It has also attracted the attention of global investors, whose online trading activities open up a global marketplace. With ongoing trade disputes affecting the US market and all of Europe still unsure how Brexit will pan out, the Malaysian market is going to seem like an oasis of calm and safety.

A stable economy

The researchers noted that the potential risks associated with a change of leadership failed to materialize. Indeed, the increased clarity in domestic policy demonstrated in both the 11th Malaysia Plan and the 2019 Budget have boosted confidence both domestically and internationally.

The report remarks: “The new economic direction which focuses on free market and investor-friendly (sic) will also have significant impacts on overall business confidence and investment flows.”

MIDF Research cites a variety of factors that will influence growth. These include global trade patterns, a stable labor market, better global financial stability, healthy commodity prices and, not least, better business and consumer confidence leading to a virtuous circle of prosperity.

Increase in GDP

The report notes that Malaysia’s growth in GDP expanded 4.7 percent year on year in the fourth quarter of 2018. This was comfortably in excess of market expectations, which had stood at 4.5 percent. Over the full year, the economy grew by an impressive 4.8 percent. This was largely thanks to a combination of increased foreign trade, although a healthy industrial sector and steady domestic demand surely played their parts too.

Researchers said the solid growth was “mainly due to external factors, particularly receding trade war effects and modest recovery in the mining sector, especially crude petroleum and liquefied natural gas.” They went on to acknowledge that low inflation, high domestic demand and forward-thinking economic policies would help to sustain this growth level and predicted that GDP would grow by a further 4.9 percent during the course of this year.

Maintaining all the above factors will be crucial here, but the researchers also predict a thawing of relations between the USA and China. This can only be good news for all the world’s economies, and Malaysia is no exception.

What are the risks?

Malaysia’s economic future is looking bright, but there are always potential obstacles. According to the experts at MIDF, there are two key risks of which investors need to be aware.

The first concerns potential shifts in fiscal policy on the part of the world’s financial powerhouses that would affect developing economies. The other is the related issue of Malaysia’s trade surplus, which expanded from RM 10.7 billion to RM 11.5 billion over the past year. This means the overall economy will be ever more strongly influenced by any shift in the export market.  

 

Featured image credit: Edited from Unsplash

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