Malaysia Economy Seen Growing At Above 4% in 2Q: IBC Assets

Malaysia Economy Seen Growing At Above 4% in 2Q: IBC Assets KUALA LUMPUR (Aug. 15): Malaysia’s economy is projected to expand at a rate of at least 4% in the second quarter this year, supported by exports, said Dr. Serge Pierre Besanger, head of research at IBC Assets Berhad. While imports dropped by 9.2% to RM65.9 billion in June from a year ago, it is exports minus imports that contributes to gross domestic product and there was a significant improvement on that front, with the balance of trade widening to RM10.3 billion in June, from RM9.1 billion in the previous month, according to Dr. Besanger.

Still, capital expenditure is likely to have dropped sharply in the second quarter, as evidenced by the steep fall in imports of capital goods (-23.6% year-on-year in June), said Dr. Besanger, who was an acting director at the IMF-Singapore Regional Training Institute during the Asian Financial Crisis. Capital expenditure will eventually recover, bolstered by infrastructure projects and the redesign of value chains, he said, citing a recent Nomura research report that ranks Malaysia as one of the four largest beneficiaries of trade diversion from the ongoing trade dispute between the U.S. and China.

“While Thailand and Indonesia could lose their Generalized System of Preferences (GSP) status due to persistent allegations of intellectual property breaches, Malaysia is immune to such threats because it is essentially a level playing field and the country has a strong track record in respecting intellectual property,” Dr Besanger said.

Private consumption is expected to grow at a healthy rate of at least 5% in the second quarter despite a slight uptick in unemployment and a tight fiscal policy which is set to weigh on domestic demand as the Government works on gradually reducing the budget deficit. Private consumption will remain a key growth driver of the Malaysian economy, Dr Besanger said.

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