The ongoing global issues such as trade war, currency war, risk of emerging market debt crisis and global monetary tightening, added with domestic challenges could weigh on Malaysia’s GDP outlook, analysts say. — Bernama photo
KUCHING: There were generally mixed projections as to Malaysia’s growth domestic product (GDP) growth for the second quarter of 2018 (2Q18) with some believing that the challenges could persist until 2019.
AmInvestment Bank Bhd (AmInvestment Bank) said that the economic outlook in 2Q18 should stay healthy, likely to expand around 5.6 per cent to 5.8 per cent.
“We believe the economy will grow around 5.5 per cent for the full year of 2018 with the lower end of our base case GDP growth projection at 5.3 per cent.
“Growth will continue to be supported by private expenditure and exports reflected with evidence of higher output and new export orders,” it said.
Meanwhile, Affin Hwang Investment Bank Bhd (Affin Hwang) expected the country’s real GDP growth to have grown at a softer pace of 5.1 to 5.3 per cent per cent year on year (y-o-y) for 2Q18, as compared to 5.4 per cent in 1Q18.
“For 2018, we maintain our forecast for the country’s real GDP growth to expand by 5.3 per cent, but GDP growth could come in slightly lower than our current forecast,” the research firm said.
“We expect a relatively healthy expansion in private sector activities, especially in consumer spending, which will support higher GDP growth in 3Q18, due to the tax holiday as well as healthy growth in income and employment.
“Domestic demand will likely remain supportive of the country’s real GDP growth.”
Affin Hwang noted that there are downside risks from the external front.
Apart from uncertainty in China’s economy and growth in the emerging markets, the research firm expected downside risks from the uncertainty over trade tension between the US and China.
According to Affin Hwang, China’s government recently announced that it will retaliate and impose 25 per cent tariffs on US$16 billion worth of imports from the US from August 22 (having already imposed tariffs on US$34 billion worth of US imports), matching the earlier tariff move by the US.
“While Malaysia’s exports and production of electrical and electronics (E&E) remained healthy, we are cautious of a sharp slowdown in China’s economy, where from our analysis, a one percentage-point drop in its GDP growth will likely drag down Malaysia’s economic growth by 0.5 percentage points.”
In AmInvestment Bank’s view, the challenge to the economic growth will be in 2019.
“Ongoing global issues such as trade war, currency war, risk of emerging market debt crisis and global monetary tightening, added with domestic challenges could weigh on potential GDP outlook.
“Thus, we project 2019 GDP at five per cent.”