SEGAMAT, June 30 — The election of China’s deputy agricultural minister Dr Qu Dongyu as Director-General of the Food and Agriculture Organisation of the United Nations (FAO) has been seen as a very apt and relevant move in Malaysia’s bid to…
HANOI, June 30 — The European Union signed a landmark free trade deal with Vietnam today, the first of its kind with a developing country in Asia, paving the way for tariff reductions on 99 per cent of goods between the trading bloc and Southeast…
JASIN, June 30 — The Primary Industries Ministry has allocated RM6.25 million to expand kenaf cultivation in the country to achieve the targeted fibre production as well as kenaf seed production from 2,500 hectares of land this year. Its Deputy…
ZURICH, June 30 — Central banks grappling with fast-changing financial technology and companies like Facebook moving into finance will aim to work together more closely through an innovation hub approved today by the Bank for International…
PETALING JAYA: Malaysia’s private consumption remains supportive of economic growth, led by steady income as well as employment growth despite slower 4.5% GDP growth recorded in the first quarter of the year, according to Affin Hwang Research.
“Going forward into 2H19, we believe private consumption growth will continue to be supported by healthy labour market conditions, as well as government measures including Bantuan Sara Hidup and the likely targeted petrol subsidy to be implemented in 2H19,” the research house said in a research note.
Overall, it expects Malaysia’s GDP growth to slow from 4.5% in Q1 to 4.4% in Q2, before recovering to 4.7% in the second half, with a full-year average of around 4.5%, which is still at the mid-point of the official forecast range of 4.3-4.8%.
It also pointed out that Bank Negara Malaysia’s decision to cut the overnight policy rate by 25bps from 3.25% to 3.0% last month, could also support growth in domestic demand.
Against a backdrop of continued uncertainty in the global economy, Affin Hwang expects the government to propose further measures to support the domestic economy in preparing for the strategies for the 2020 budget.
PETALING JAYA: While the government has given the assurance that it does not have to fork out a single sen for the proposed buyout of four toll highways in the country, there are concerns whether the congestion charge model will be sufficient to offset the whopping takeover sum of RM6.2 billion.
In case it does not, what would be the consequences to the overall economy of the country and the government’s financial position?
Generally, economists view the takeover offer as a positive move and would not hamper the government’s target of reducing the fiscal deficit to 3.4% to gross domestic product this year.
Finance Minister Lim Guan Eng has said that the RM6.2 billion buyout sum will be financed through the issuance of bonds and a special purpose vehicle (SPV) will be set up to facilitate the move.
Sunway University Business School Professor of Economics Dr Yeah Kim Leng explained that since it will only be an indirect contingent liability on the balance sheet if the SPV fails to service its debt, it will not be a burden on the government’s balance sheet.
Last Friday, Gamuda Bhd said it has decided to approve the takeover offer by the government to acquire its stake in four toll highways, namely Damansara-Puchong Highway (LDP), Sistem Penyuraian Trafik KL Barat (Sprint), Shah Alam Expressway (Kesas) and the Stormwater Management and Road Tunnel (Smart).
With the proposed takeover, Lim said the government is expected to save RM5.3 billion in compensation payment to the concessionaire holders and the toll charges will be replaced with the congestion charge model with variable rates for peak period and off-peak period.
As the proposed takeover is done on a willing seller-willing buyer basis, Yeah believes that it will be a confidence boost to the market.
Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew dismissed the risk of the highway takeover cost to the government’s credit ratings.
“There is no risk of a downgrade on government credit ratings. While the takeover will require an immediate capital outlay, it is intended to shield the public from a toll hike.”
He explained that the payoff could be viewed as a net positive in the longer term as the government will no longer have to contend with compensation payments.
For this year, the freeze on toll hikes for all vehicles on 21 highways and the abolition of motocycle tolls is projected to cost the government RM994.43 million.
The government’s overall debt and liabilities stood at RM1.1 trillion or 75.4% of the gross domestic product (GDP) as at end-2018, partly due to a RM54.2 billion rise in direct government debt to RM741.0 billion from RM686.8 billion in the previous year.
Despite that, Lim said the government’s fiscal consolidation remains on track as it is targeting to cut the fiscal deficit from 3.7% in 2018 to below 3% by 2021. For 2019 and 2020, the fiscal deficit is expected to be 3.4% and 3%, respectively.
BEIJING: China’s factory activity shrank more than expected in June, an official survey showed on Sunday, highlighting the need for more economic stimulus as U.S. trade tariffs ramped up pressure on the world’s second-largest economy.
The weak manufacturing readings are likely to cast a shadow over the apparent progress U.S. and Chinese leaders made in Japan over the weekend in restarting their troubled talks over tariffs amid a costly trade war.
The indicators will also spark concerns about stalling growth in China and the risk of a global recession, despite slightly better-than-expected export and industrial profits data in May.
The official Purchasing Managers’ Index (PMI) stood at 49.4 in June, unchanged from the previous month and below the 50-point mark that separates growth from contraction on a monthly basis. Analysts polled by Reuters predicted a reading of 49.5.
Many economists still expect the economy to face strong headwinds in the coming months as domestic demand falters and external risks rise.
In June, China’s factory output growth slowed, with the subindex falling to 51.3 from 51.7 in May while the contraction in total new orders accelerated to 49.6 from 49.8.
Export orders extended their decline with the sub-index falling to 46.3 from May’s 46.5, suggesting a further weakening in global demand.
While China’s exporters are feeling the pinch, Sunday’s data showed import orders also worsened, reflecting softening demand at home despite a flurry of growth-supporting measures rolled out earlier this year.
Presidents Donald Trump and Xi Jinping’s held ice-breaking talks in Japan on Saturday. However, Chinese state media warned on Sunday Beijing and Washington will likely face a long road before the two countries could reach a deal.
Analysts at Nomura expect any gains achieved on a temporary trade deal between China and the United States would prove fleeting with a renewed escalation likely further down the road.
Trump has already imposed tariffs on $250 billion of Chinese goods and is threatening to extend those to another $300 billion, which would effectively cover all of China’s exports to the United States. China has retaliated with tariffs on U.S. imports.
To deal with the economic challenges, policymakers have released a range of stimulus and are expected to launch more. Premier Li Keqiang last week pledged to cut real interest rates on financing for small and micro firms.
Manufacturers continued to cut jobs in June, with the employment sub-index falling to 46.9, compared with 47.0 in May, when it hit the lowest level seen since March 2009.
An official business survey showed activity in China’s services sector held firm in June despite growing pressure on the broader economy from tougher U.S. trade measures, with the official reading at 54.2 in June from 54.3 in May.
Beijing has been counting on a strong services sector to pick up the slack as it tries to shift the economy away from a dependence on heavy industry and manufacturing exports.
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