Malaysia Economic Forecast

Malaysia Economic Outlook

April 16, 2019

The economy likely lost steam in Q1. Industrial production growth averaged notably lower in January and February compared to Q4, weighed down by a sharp contraction in mining output and a slowdown in manufacturing amid a more sluggish electronics sector. Moreover, exports declined notably in the same period in USD terms on lower exports of palm oil, while retail sales growth—albeit still robust—was down from the stellar readings observed in H2 2018, when sales were buoyed by a tax holiday. In addition, although the labor market remains healthy as reflected by an unemployment rate of just 3.3%, employment growth has ebbed so far this year. On the political front, in early April Malaysia and China agreed to relaunch a cheaper version of the East Coast Rail Link project, which had previously been cancelled by the Malaysian government. This bodes well for long-run growth and economic relations with China.

Malaysia Economic Growth

Growth is seen dimming slightly this year amid a normalization in private consumption growth and a softer expansion in public consumption as the government looks to trim the fiscal deficit. Moreover, the external sector is seen softening amid a maturing tech cycle. Global trade tensions and uncertain economic dynamics in China pose downside risks. Our panel sees the economy growing 4.5% in 2019, which is unchanged from last month’s forecast, and 4.5% again in 2020.

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Malaysia Facts

Bond Yield3.780.15 %Apr 12
Exchange Rate4.110.0 %Apr 12
Stock Market1,630-0.29 %Apr 12

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