KUCHING: As much as Malaysia’s own domestic drivers can help buffer the impact, the global situation is still the biggest swing factor, with unavoidable impact on investment and trade.
OCBC Bank (OCBC) highlighted this in its latest update on Malaysia’s economy.
It pointed out that even though Bank Negara Malaysia (BNM) appears to subscribe to the view that domestic growth remains largely favourable, it is still very much subjected to the ripple effects from global events.
“Given the lack of strong countervailing domestic factors and the increasingly tricky negotiations between US and China trade representatives, BNM continues to be watchful. Already, Governor Datuk Nor Shamsiah Mohd Yunus reminded markets today that the central bank under her watch is “not on a preset” course and will continue to monitor incoming data.
“As much as we believe (and hope) that the baseline is for some US-China deal to come through such that central banks like BNM do not need to reach for the easing trigger in the immediate months ahead, it is very much still a day-by-day recalibration depending on news flow on the progress, if any, of the negotiations,” it opined.
Meanwhile, on Malaysia’s performance in the third quarter of 2019 (3Q19), OCBC noted that while Malaysia happily surprised the market a quarter ago when it announced the 4.9 per cent y-o-y growth for 2Q GDP (against expectation of 4.7 per cent), its 3Q GDP was just broadly in line with market consensus’ expectations of 4.4 per cent y-o-y growth.
“We had pencilled in 4.5 per cent growth, predicated on more relative support from FDI investment activities. Even though it is by no means a poor set of data, the 3Q GDP release nonetheless shows some signals of a slowing sequential growth momentum that signal tougher roads ahead.
“On a seasonally adjusted basis, for instance, the quarter-on-quarter growth rate came in at 0.9 per cent, the slowest momentum in over a year,” it noted.
It added that the cause of this slowdown could be from slowed contribution from private consumption. It highlighted that on a year-on-year basis, private consumption growth came in at seven per cent in 3Q, but lower than 7.8 per cent and the slowest since early 2018.
Investment activities have also declined significantly, pointing to the first challenge faced by the government in achieving its lofty growth target of 4.8 per cent for 2020. In year-on-year terms, investment GDP grew by 3.72 per cent, the deepest contraction this year.