Business confidence for the services sector in Malaysia has increased to 18.8 per cent, the highest in three quarters, driven by tepid inflationary pressure and the current stable job market. — Reuters photo
KUCHING: Business confidence for the services sector in Malaysia has increased to 18.8 per cent, the highest in three quarters, driven by tepid inflationary pressure and the current stable job market.
“As guided by the midterm review of 11th Malaysia Plan and Budget 2019, enlarging consumer’s purchasing power is among key pillars under the new government to spur domestic demand as well as overall economic activity.
“Overall, domestic demand is seen to stay strong in 2019, contributing solid support for economic growth,” said MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) in a recent report.
For the year ahead, the research team believed that overall business performance is expected to improve for the next six months of 2019 or the first half of 2019 (1H19).
“Overall business performance for the fourth quarter of 2018 (4Q18) to 1Q19 is expected to enjoy steady pick-up especially for mining & quarrying, manufacturing, and services sectors.
“Strong domestic demand and low inflationary pressure are fundamental factors supporting services sectors,” it commented.
“On external front, we opine the effects of trade war are gradually contained by most economies including Malaysia.
“The gradual pace of tariff hikes by the US provides enough rooms for economies to absorb impacts and manage risks.
“Business confidence among manufacturers is on improving trend, expecting better performance for the next six months.
“As for commodity-based sectors, uncertain future for agriculture remains while mining & quarrying players are expecting improve outlook for the next six months,” it said.
It also noted that the effects of trade war are easing.
It explained: “Manufacturing PMI for US stays on uptick direction amid robust domestic demand in the economy. As for European Union (EU), geopolitical stress in the region such as Brexit deal and Italy’s populist budget are pressuring economic sentiment.
“Business confidence in China remains on moderation mood, thanks to tariff hikes by the US. Among major risks, retaliation by China via withdrawal of its holdings in the US government debt may cause global financial market destabilisation.
“However, manufacturing PMI for both global, developed and emerging economies are still on optimistic path, indicating continuous expansion in global growth in 2019.”
On the performance of the region, MIDF Research said, optimism remained in Asean.
“Business confidences in emerging economies as well as Asean remain in optimistic path as most economies recording above expansionary line of 50 points. Among the top five Asean economies, manufacturing PMI Indonesia, Philippines and Singapore registered above 50 points in October 2018.
“Looking ahead, we predict the overall import tariff cut from 9.8 to 7.5 per cent by China will benefit Asean economies in the next three to six months,” it said, noting that the official tariff cut is effectively on November 1, 2018.
All in, MIDF Research said, Malaysia’s GDP is expected to expand by 4.8 per cent in 2018.
“Based on the current developments and indicators, we anticipate Malaysia’s economy to expand by 4.8 per cent this year given the upbeat performance of domestic and external trade sectors. Besides, supportive economic policies, stable labour market, continued wage growth and moderating inflation will support and spur domestic economy,” it added.