KUCHING: Malaysia’s current account position has been projected by analysts to remain intact while others believe surplus will narrow further in 2019.
As per a press release by the Department of Statistics Malaysia last week, Malaysia’s current account surplus surged to RM10.8 billion in the final quarter of 2018 as compared RM3.8 billion in previous quarter.
“For the year 2018, the current account surplus reached RM33.5 billion contributed by higher surplus in goods account and lower deficit in services account,” the statement read.
According to the research arm of Public Investment Bank Bhd (PublicInvest Research), Malaysia’s current account position is expected to remain intact, premised on the expectation that US-China trade negotiations will end favourably.
“This could lead to the normalisation of global trade with a strong spillover effect to Malaysia, one of the most open economies in the region,” PublicInvest Research said in its economic update.
“The slowdown in US interest rate adjustment, with only two slated for 2019 against four in 2018, suggests that capital movement may enter a normalised period that will see a return of liquidity to the region.
“The undervalued position of ringgit will be an attractive proposition, not only for portfolio investment but also for foreign direct investment (FDI), essentially putting Malaysia in the main radar of investors, supporting our view of enviable current account prospect in 2019.”
On the other hand, Kenanga Investment Bank Bhd (Kenanga Research) projected that the current account surplus will narrow further in 2019.
“Though the current account appears to moderate, it is unlikely to turn into a deficit largely because exports continue to grow albeit slower while domestic demand is expected to weaken bringing about lower imports,” Kenanga Research said.
“Hence, we forecast the current account surplus to continue to narrow this year and to settle at around two per cent of gross domestic product (GDP) (2.3 per cent of GDP in 2018).
“Meanwhile, the current dovish US Fed would weigh on the US dollar and provide some upside to the ringgit in the near term with the US dollar-ringgit to break the psychological 4.00-level in the first quarter of 2019 (1Q19) from the current level of 4.08.”
Nonetheless, the research arm maintained its year-end US dollar-ringgit projection at 4.10 (4.13 in 2018) on the backdrop of slower global and domestic economic growth.