KUCHING: Malaysia’s real gross domestic product (GDP) growth of 4.7 per cent year-on-year (y-o-y) in the fourth quarter of 2018 (4Q18) generally exceeded market expectations but analysts are still less sanguine on the country’s economic prospects for 2019.
According to Bank Negara Malaysia (BNM), Malaysia’s economy grew by 4.7 per cent y-o-y in 4Q, driven by growth in the private sector as well as improvements in net exports. BNM said, the Malaysian economy is expected to remain on a steady growth path, with the private sector expected to continue being the main driver of growth, amid continuing fiscal rationalisation.
However, RHB Research Institute Sdn Bhd (RHB Research) said: “Despite the improvement in 4Q18’s GDP growth, the underlying growth, in our view, remained unexciting and it was mainly driven by private consumption growth, where the growth momentum had also weakened somewhat.
“Although private consumption grew at a strong pace of 8.5 per cent y-o-y during the quarter, it was a slight moderation from nine per cent in 3Q18.”
RHB Malaysia economist continued to expect growth to remain subdued in 2019, given the challenging economic environment both externally and domestically. As a result, it retained its GDP forecast of 4.6 per cent in 2019, a slight moderation from 4.7 per cent recorded in 2018.
Meanwhile, AmInvestment Bank Bhd’s research arm (AmInvestment) highlighted that the challenges in 2019 remained elevated from both domestic and external headwinds.
“On the domestic front, downside risks include easing consumer confidence, and volatile oil prices.
“However, 2018 inventories shaved 1.5 percentage points of GDP growth. It could mean that the inventory cycle could potentially provide some upside.
“Meanwhile, external demand is expected to be softer than in 2018 as key cyclical indicators are pointed to the downside.
“For now, we project global growth to moderate to 3.6 per cent in 2019 should global risk is broadly balanced,” it explained.
For 2019, AmInvestment projected growth to hover around 4.5 to 4.8 per cent, lower than the official’s projection of 4.9 per cent.
“Growth will continue to be supported by the private sector particularly on private consumption in view of the healthy labour market, stable inflation, conducive financing and higher minimum wages.
“Public consumption and investment will also remain muted with the continued fiscal consolidation path,” it added.
Sharing AmInvestment’s view, the research team at Kenanga Investment Bank Bhd (Kenanga Research) said, by the looks of how global situation is panning out, 2019 is not expected to perform any better.
“The situation for many export-dependent developing economies remain concerning as exports are likely to dwindle, given escalating expectation of economic slowdown in key export markets including China and the US, among others due to the structural rebalancing and negative spillovers from the US-China trade war for the former, and unwinding of fiscal stimulus for the latter,” it added.
“Fortunately for Malaysia, its fundamental strength arising from diversified sources of growth and trade partners are expected to provide some buffer to the economy, hindering a sharp deterioration in economic growth,” it highlighted.
On the domestic front, however, it pointed out that public investment would remain a drag to growth, hampered by the government’s decision to review mega infrastructure projects, reprioritise spending and restructuring of its burgeoning debt.
“The aforementioned are likely to outweigh resilience in private expenditure, propelled by continued wage growth, modest inflation and strength in labour market conditions, observed through the growth of labour force and employment which have exceeded unemployment growth for the past 22 consecutive months,” it added.
It also pointed out that the higher growth registered in the 4Q18 is not expected to extend into the succeeding quarters, as evidenced by high-frequency indicators, including the manufacturing PMI, merchandise exports, distributive trade sales and sentiment indices, which have been steering towards tapering growth momentum recently.
It said: “Coupled with the release of 4Q18 figure which underperformed our house estimate, we revise our GDP growth forecast for this year down to 4.5 per cent from 4.7 per cent initially, implying that economic expansion would subside going forward.
“1Q19 GDP growth would ease to 4.4 per cent before edging even lower to 4.3 per cent, resulting in an overall slower growth in 1H19 at 4.4 per cent.”
Sector-wise, Kenanga Research said, export-oriented manufacturing sector is expected to experience a more moderate expansion, while the services sector remains a key pillar to the economy.
“We foresee some upward support emanating from a rebound in agriculture, underpinned by implementation of higher biodiesel blending mandate in Indonesia and Malaysia, re-emergence of el-Nino and recent slash in India’s palm oil import duty, as well as a recovery in the mining sector, as the natural gas production facility, which underwent a disruption due to gas pipeline leak last year is expected to return to full capacity in the second half of 2019,” it added.
Source: Borneo Post Online