CONSUMPTION, INVESTMENT DRIVE GROWTH, SAYS S&P
KUALA LUMPUR: Standard & Poor’s (S&P) has described Malaysia’s growth story as broadly unchanged, driven by steady consumption activities with some support from investments.
Despite a few years of high household debt levels, domestic consumption continues to hold.
“For Malaysia, like elsewhere in the region, net exports have not been a big contributor to growth,” said its Asia Pacific economist, Vincent Conti, in a webcast on Asia Pacific credit conditions.
According to S&P, the gross domestic product growth in the region remained steady, largely driven by private consumption. External demand was strong in Malaysia as well as in Taiwan, Thailand and Singapore.
Export growth increased in July after easing in the previous few months with rising global demand, particularly for electronics. Shipments from Malaysia rose significantly due to a spurt in demand from the European Union, China and Singapore for its machinery, transport equipment and mineral fuels.
On the foreign exchange front, S&P said Asia Pacific currencies continued to gain against the US dollar amid tensions on the Korean peninsula.
On the outlook for interest rate in Malaysia, Conti expects Bank Negara Malaysia to hike the Overnight Policy Rate next year.
“It is based on a broad trend we see in Southeast Asia based on their profiles,” he said.
On risks to the region and the potential turbulence of the United States Federal Reserve’s quantitative easing exit, S&P Asia Pacific chief economist Paul Gruenwald said: “No one is sticking out (in terms) of current account imbalances. They are not as affected as other emerging markets.”
Gruenwald described the growth forecasts of Asia Pacific as better than the other regions and pointed to Japan, China and Australia as looking better with their strong numbers.
On macro risks, he said the earlier US-China trade disturbance/trade war had diminished significantly. Rupa Damodaran