2017 a year of recovery, private investments to spur growth
KUCHING: Malaysia's economy will strengthen this year, driven by a recovery in global commodity prices, while private investment is expected to expand due to the expected solid improvement of economic activities in Malaysia.
MIDF Amanah Investment Bank Bhd's research arm (MIDF Research) in an economic report said based on current macroeconomic condition, most indicators are reflecting strong and robust recovery since middle of 2016.
For instance, it noted that Malaysia's gross domestic product (GDP) growth recorded at 5.6 per cent year-on-year (y-o-y) in the first quarter this year, the highest in two years.
It added, private investment grew at three- year's high of 12.9 per cent y-o-y during the quarter.
“Looking at private investment's indicators, we opine that the expenditure component will break its five consecutive years of deceleration in annual growth.
“We expect private investment to expand by 5.6 per cent in 2017 due to solid improvement of economic activities in Malaysia,” it commented.
The research team believed that the strong trade performance has positive spillover effects on Malaysia's economy in particular on private investment.
It explained, “Based on the first quarter performance, surged in external trade have restored business confidence and reinvigorating investment climate as reflected in MIER's Second Quarter Business Confidence Index which rose above 100-threshold points during the quarter at 112.7 points.
“We also observed industrial production figures in 2017 perform better than previous year's.
“As a result, private investment particularly investment in machinery & equipment expanded by 12.9 per cent yoy and 21.8 per cent y- o- y respectively in the first quarter of 2017.
“The growth in private investment recorded in the first quarter 2017 was the highest in four years.”
On the growth of private investments into Malaysia, MIDF Research noted that the International Monetary Fund (IMF) forecast world GDP growth to improve to 3.5 per cent in 2017 as compared to 3.2 per cent in 2016.
“We believe further investment via capital expenditure will take place especially in manufacturing and mining sectors with installation of new machineries, technologies and equipment,” it added.
Among others, import of investment and intermediate goods are indicators for private investment performance, the research team said.
“Import of capital goods as well as machinery and transport equipment are major components of investment goods.
“Since November 2016, both import of investment and intermediate goods have been expanding strongly at double digit rate.
“In fact, we noticed that the average growth for the first five months of 2017 for both import goods is well above 20 per cent y-o-y,” it said.
Aside from that, the research team noted that on a demand side, positive performances in loan approvals, working capital and motor vehicles sales provide strong hint about the direction of private investment in Malaysia.
It explained, “Loan growth for the first five months of 2017 recorded better performance than the average loan growth in 2016, 7.8 per cent y-o-y compared with a decline of 11.4 per cent y-o-y respectively.
“The surge in the loan growth is contributed by loan approvals for purchase of securities, fixed assets, mortgages, vehicles and credit cards. By sector, mining, manufacturing and construction sectors are the main contributors towards higher loan growth.”
Overall, MIDF Research opined due due to favourable global and domestic economic activities, it expected Malaysia’s economy to grow stronger this year as compared to 2016.
“With recovery in global commodity prices, we opine private investment will change its direction upwards this year after five years of deceleration.
“Investmentincommodity-based and export-oriented sectors such as manufacturing, mining and agriculture sectors are expected to rise in 2017,” it concluded.