Malaysian economy likely to bottom out in Q2, says AmBank Research

PETALING JAYA: AmBank Research, which anticipates further pressure on ’s economic growth in the first quarter of the year (Q1 2019), believes that gross domestic product (GDP) growth should register slight improvement in the second quarter and pick up thereafter.

This is partly attributable to the low base effects as well as support coming from domestic activities and foreign direct investments, and complemented by exports as the electronics cycle slows down, added with softer commodity prices, it said in a note today.

The research house said it foresees growth prospects remaining weak, anti-cipating Q4 2018 GDP growth to ease to around 4% to bring the full-year growth to 4.6%.

“With our base case GDP outlook for 2019 at 4.5% with the upside at 4.8%, we foresee further weakening pressure on growth in Q1 2019,” it added.

Malaysia’s third quarter GDP growth moderated to 4.4%, bringing about a nine-month expansion of 4.7%. Bank Negara Malaysia is due to announce Q4 GDP figures on Feb 14.

AmBank Research highlighted that the strong foreign approved investments amounting to RM48.8 billion as of Q3 2018, which is an all-time high, is expected to support growth in 2019.

The growth drivers are seen coming from petroleum refineries with RM17.2 billion investment being approved, followed by electrical and electronics (RM10.2 billion), basic metal products (RM5.7 billion), chemical and chemical products (RM4.6 billion) and rubber products (RM3.5 billion).

Additionally, it said, agriculture, mining, and plantation and commodities saw a notable increase in approved investments with 54 projects as of Q3 2018, compared with 48 projects in 2017.

Furthermore, investments in the services sector will continue to boost growth largely coming from local players with RM60.4 billion approved investments compared with RM96 billion in 2017, while foreign investments remained muted at RM9.5 billion as of Q3 2018 from RM28.5 billion in 2017.

Commenting on the slump in the Nikkei Malaysia Manufacturing Pur-chasing Managers’ Index (PMI), AmResearch said it indicates downside risks with overall demand to be weak, thus causing companies to become less willing to hold stocks.

The headline PMI fell to a six-month low of 46.8 in December 2018 from 48.2 in the previous month. The demarcation between expansion and contraction is 50.

The data points to the sharpest deterioration in the health of the goods-producing sector since May. It also extended the current period of decline to two months. The drag largely came from severe reductions in production and new businesses.

Source: The Sun Daily

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