‘Asia ex­port growth likely to slow’

New Straits Times - - Business -

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.

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