Sunday, August 18th, 2019
KUALA LUMPUR: Malaysia’s gross domestic product (GDP) growth in 2019, which may be lower by 0.1 percentage point (ppt) if there is a further escalation in the US-China trade war, will still be “manageable”, said Socio-Economic Research Centre (SERC) executive director Lee Heng Guie.
He said despite the economy growing 4.7% in the first half of 2019, Bank Negara Malaysia (BNM) still wants to maintain its cautiousness.
“There are still a lot of risks ahead, and this trade war effect could have more impact, also possibly lag effect, going into next year. It’s good to be cautious in the assessment of the economy, at least the government can be well prepared for the risks,” he told SunBiz.
BNM sees lower downside risks for Malaysia this year in its latest assessment of the US-China trade war due mainly to the delay in the implementation of selected tariffs.
“Should the trade dispute escalate further, global growth is expected to be lower by 0.1ppt. Consequently, Malaysia’s GDP growth will be lowered by 0.1ppt in 2019 due to lower trade income and investment activity,” BNM governor Datuk Nor Shamsiah Mohd Yunus said when announcing Malaysia’s second quarter (Q2’19) GDP growth figures last Friday.
Further escalation of trade tensions will weigh on growth outlook, with the central bank also estimating that Malaysia’s exports may be lower by 0.2ppt this year, as global trade is projected to shrink by 0.1ppt.
In its Q318 Quarterly Bulletin, BNM warned that Malaysia’s 2019 GDP could be much lower by 0.9 to 1.1ppt, while exports could be lower by 1.2 to 1.7ppt.
However, BNM is maintaining its projection for the Malaysian economy to grow between 4.3% and 4.8% this year.
“Going into second half 2019, we believe that growth will still be challenging and SERC is keeping our full-year GDP growth estimate of 4.5-4.7%. We’re not expecting a global recession but global growth will still be a key risk for next year,” said Lee.
Malaysia’s economy grew at a stronger pace of 4.9% in Q2’19, from 4.5% in the first quarter, supported, by higher household spending and private investment.
Meanwhile, UOB also remained cautious given escalating external risks. Key risks to its growth outlook include a more pronounced global slowdown, breakdown in US-China trade talks with further tariffs and retaliatory actions, and a no-deal Brexit. It is maintaining its GDP growth forecast of 4.6% for 2019.
“We think BNM is less likely to pursue another rate cut in the upcoming MPC meeting des-pite the recent synchronised rate reductions by four Asia-Pacific central banks last week. BNM has already made one pre-emptive 25bps cut in May and is likely to wait for the outcome of US Fed rate deci-sion, US-China talks, and Malaysia’s Budget announce-ment,” UOB added.
Separately, RAM Ratings maintained its Malaysian GDP growth forecast at 4.6% for 2019 although external headwinds prevail. It said ongoing expectations of weaker economic prospects are envisaged to hamper capacity-building activities. Hence, its expectation for private investment activity this year stands at a moderate 2.2% (2018: 4.8%).
Going forward, it expects the policy stance to stay supportive of growth, with potentially looser monetary policy and fiscal buffers at the ready. Potential moves on the Overnight Policy Rate (OPR) are anticipated to be largely data-dependent, in response to signs of significant downside risks to growth.
“Accordingly, we have maintained our expectation of the OPR ending the year at 3.00%, albeit also of the view that there is scope for further loosening if required. Another factor that may support further easing is benign inflationary pressure that has prevailed.”
KUALA LUMPUR: Bank Negara Malaysia (BNM) has announced further liberalisation of the foreign exchange administration (FEA) policy with new measures effective Aug 30, 2019 aimed at providing greater flexibility and efficiency for businesses to manage their foreign exchange risk and conduct their daily operations.
Firstly, residents can hedge their foreign currency current account obligations up to their underlying tenure, compared with up to 12 months previously.
Secondly, resident treasury centres can hedge on behalf of their related entities, while non-resident treasury centres can hedge on behalf of their related entities upon a one-time registration with BNM, compared with required approval previously.
Thirdly, non-residents can hedge on anticipatory basis, compared with required approval previously.
Fourthly, BNM has revised the definition of domestic ringgit borrowing by exempting credit facilities for miscellaneous expenses.
On another note, governor Datuk Nor Shamsiah Mohd Yunus said BNM has had “positive engagements” with global index provider FTSE Russell.
“They (FTSE Russell) were appreciative of the measures we’ve put in place to deepen the onshore market,“ she told reporters after announcing the second quarter’s gross domestic product growth last Friday.
She said the new measures seek to deepen the onshore foreign exchange market to provide investors the flexibility to undertake hedging.
In April, FTSE Russell said it may drop Malaysian debt from the FTSE World Government Bond Index due to concern about market liquidity. The review is due in September.
MOSCOW, Aug 18 — New machines popping up in Russian shopping centres seem innocuous enough — users insert their passport and receive a small loan in a matter of minutes. But the devices, which dispense credit in Saint Petersburg malls at a…
BUENOS AIRES, Aug 18 — Argentina´s Treasury Minister Nicolas Dujovne has resigned, saying in a letter seen by Reuters yesterday he believed the government needed “significant renewal” in its economic team amid a crisis which saw the peso…
LONDON, Aug 18 — Britain will face shortages of fuel, food and medicine if it leaves the European Union without a transition deal, jamming ports and requiring a hard border in Ireland, official government documents leaked to the Sunday Times show….