KUCHING: Against the backdrop of a continually challenging external demand landscape, Malaysia’s economic resilience will rely heavily on domestic drivers in 2020, RAM Ratings in its latest economic outlook.
According to RAM, as forward-looking external cyclical indicators remain weak and the world economy still faces the risks of rising trade protectionism as well as uncertain trade policy direction, the current ebbing of global growth momentum shows little sign of being arrested anytime soon.
“As such, growth will be bolstered to a large extent by resilient consumption and the revival of infrastructure investments. Given these factors and considerations, economic growth is forecast to ease slightly to 4.5 per cent in 2020, from the 4.6 per cent expected this year,” RAM said.
From RAM’s analysis of RAM Business Confidence Index (RAM BCI) data, domestic-oriented firms have been recording very stable readings in the last few quarters.
“Over the last several years, the construction and services sectors (the most domestic-oriented) have been exhibiting high ratios of employee compensation to value-added output, as well as a lower variability in wage growth compared to those in the manufacturing sector.
“This is conducive to a more predictable stream of income for sustainable consumption. The anticipated resilience of domestic-oriented sectors should contribute positively to the healthy 6.8 per cent growth of private consumption next year, compared to the projected 7.3 per cent for 2019.”
Analysis based on the RAM BCI also indicated that uncertain future demand continues to impinge on cyclically driven investment decisions.
“Thus, the main upside potential from investment activities in the coming year will stem from the infrastructure component with the full resumption of key big-ticket infrastructure projects.
“Apart from that, widespread nationwide infrastructure repairs and enhancements, including rural infrastructure and utilities, should also create some additional benefits for investment growth.
“Private investment is forecast to expand 3.6 per cent next year, from the projected 1.2 per cent for 2019.”