‘Asia export growth likely to slow’

After a strong first-quarter economic growth, underpinned by strong exports, Asian economies are likely to see growth engines shift to domestic demand.

Credit Suisse expects export growth to slow to mid-single digit from mid-teens rate currently.

“The big lift to Asian export volume and value from China was likely over as tailwinds from Chinese tech demand and infrastructure investment fade.

“The demand in other major economies was unlikely to offset this,” said the research house in a report yesterday.

Singapore’s growth would be most vulnerable while the Philippines would see current account deficits. It expects India, Indonesia, Malaysia and Thailand to see further growth recovery.

The Malaysian economy should improve to 4.5 per cent this year from 4.2 per cent last year.

“This was due to fading fiscal policy drag and boost to consumption and construction from the rebound in commodity prices,” it added.

Public sector spending will increase with the large infrastructure projects ramping up this year. They are the Mass Rapid Transit 2 (RM27 billion), Pan Borneo Highway (RM29 billion) and East Coast Rail Line (RM55 billion).

China can provide additional boost to growth since it will help finance and build some of the major infrastructure projects.

Bank Negara Malaysia is expected to keep the Overnight Policy Rate unchanged at 3.00 per cent although the risk is tilted towards rate hikes.

“We forecast Bank Negara to keep rates unchanged as inflation likely peaked in the first quarter as the impact of cooking oil subsidies and domestic fuel price increases fade out.”

Earlier negative fiscal shocks to consumption — subsidy cuts through public transport fare hikes, tobacco increases and electricity tariff increases — should fade this year.

Credit growth has rebounded albeit from a low level.

Current account should improve to 2.5 per cent of gross domestic product (GDP) from 2.0 per cent of GDP last year.

Credit Suisse also expects the currency fears to fade, adding that the ringgit, which was “under-owned” by foreign investors, has room to catch up.

“Bank Negara’s intervention (to support the currency) is a risk, but a soft dollar environment implies less urgency to accumulate reserves.”

Bond investors already see the market as heavily underweight, while the export conversion rules should increase demand for the local currency, it added.