Thursday, June 20

Malaysia to have minimal impact on US-China trade war

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Containers are seen at the Yangshan Deep Water Port in Shanghai, China. Malaysia will have a minimal impact on the US-China trade war since the country is a small open economy. — Reuters photo

KUALA LUMPUR: Malaysia will have a minimal impact on the US-China trade war since the country is a small open economy, says Bank Negara Malaysia (BNM).

However, if the trade war continues to escalate, the whole global economy will be affected and there could be a reduction in global growth by 0.5 per cent by 2020, said BNM Governor Datuk Noor Shamsiah Mohd Yunus.

“But having said that, one of our economy’s strengths is that we have a diversified economic structure.

“So, perhaps our exports will be affected by lower global growth but domestic activities will continue to sustain and this will provide a foundation for growth in that kind of scenario,” she said in a press conference after announcing the Gross Domestic Product (GDP) for the second quarter of 2018 yesterday.

Commenting on the large outflows by non-residents in the second quarter of 2018, Shamsiah said this was due mostly to external factors.

“Primarily (it was) about the uncertainty regarding the phase of US monetary policy normalisation, second was the trade tensions and third was the development of the Turkish lira.

“The external developments have been the main contributor to the large foreign outflows, but encouragingly in July and August, we have seen a significant moderation in the outflows,” she said.

Meanwhile, Shamsiah said Malaysia’s risk exposure to Turkey’s looming financial crisis and lira is small.

“For example, in terms of the corporate debt, exposure to Turkey is only 0.17 per cent, and in terms of exposure to Turkish lira-denominated debt, it is even smaller at 0.03 per cent of total corporate external debts,” she said. — Bernama