Malaysia Economic Forecast

Malaysia Economic Outlook

July 17, 2018

Data for the second quarter suggests that growth remained robust. Industrial production was healthy in the first two months of Q2, with the average growth reading trending close to the average reading in Q1. Export growth also remained strong in the same period, and in May, the 12-month trade balance reached its highest level since January 2013. Moreover, retail sales expanded at a healthy pace in April–May over a year ago. On a less positive note, the manufacturing PMI remained below the 50-point mark throughout Q2, despite edging upwards in June after four consecutive declines. In June, although operating conditions deteriorated at a slower pace, output and new orders continued to drop. To push back against Chinese influence, the new government recently suspended China-backed projects totaling USD 22 billion. The move could strain relations with China and dampen fixed investment.

Malaysia Economic Growth

Going forward, private consumption should drive economic growth, particularly in the near term given the recent zero-rating of the Goods and Services Tax (GST). However, fixed investment will likely suffer from the suspension and cancellation of previously approved projects in a bid to rein in government expenditure. Downside risks include high household debt servicing costs, policy uncertainty and a shaky fiscal situation which could dent private sector activity and investment. Met the why particular Consensus Forecast panelists expect the economy to grow 5.3% this year, unchanged from last month’s forecast, and 4.9% in 2019.

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Malaysia Facts

Bond Yield4.070.15 %Aug 15
Exchange Rate4.110.0 %Aug 15
Stock Market1,786-0.29 %Aug 15

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