Malaysia’s 1Q GDP growth to be lower due to persistent risks
KUCHING: Malaysia’s first quarter of 2019 (1Q19) gross domestic product (GDP) growth has been projected to be lower than the 4.7 per cent growth recorded in 4Q18.
According to Affin Hwang Investment Bank Bhd ( Affin Hwang Capital), the country’s real GDP growth is projected at 4.3 per cent yoy for 1Q19, lower than 4.7 per cent in 4Q18.
“We are maintaining our fullyear GDP growth forecast of 4.7 per cent for 2019, as compared to the official forecast of between 4.3 to 4.8 per cent, but we reckon that downside risks persist, as the USChina and US-Europe trade wars remain unresolved and could impact business sentiment.
“The International Monetary Fund (IMF), in the April World Economic Outlook Update report, downgraded its forecast for global growth by 0.2 percentage point to 3.3 per cent for 2019, but expects global growth to recover to 3.6 per cent next year,” the research firm said.
AmInvestment Bank Bhd ( AmInvestment Bank) held a similar view, noting that GDP growth could be in the range of 3.8 per cent to 4.5 per cent.
“On the whole, from our very rudimentary computation for 1Q19 GDP growth, it suggests that the growth is more likely to be lower than 4Q18’s GDP of 4.7 per cent,” AmInvestment Bank said.
“Our preliminary estimation suggests the GDP (growth) could be in the range of 3.8 per cent to 4.5 per cent.
“In the meantime, we reiterate our 2019 GDP growth of 4.5 per cent with our downside pegged at four per cent and upside at 4.7 per cent.”
With a weak inflation environment, the research firm was of the view that there is adequate room for Bank Negara Malaysia (BNM) to cut rates in the second half of 2019 (2H19) by 25 basis points (bps) from the current 3.25 per cent.
For 2H19, Affin Hwang Capital expected some recovery, despite expectations of slower expansion in the near term.
Affin Hwang Capital noted that for the electrical and electronics ( E& E) segment, as guided by the Semiconductor Industry Association ( SIA), the longterm outlook remains fairly optimistic.
The research firm further noted that this was on the back of higher usage of semiconductors in consumer products and future growth drivers such as artificial intelligence, virtual reality, the Internet of Things as well as 5G and next-generation communication networks.
“In its 2018 Annual Report, BNM guided that the E& E cluster will be able to benefit from higher production from new manufacturing plants and modernisation of existing facilities.
“Furthermore, BNM noted that the large oil refinery and petrochemical facilities in Johor will also support production of refined petroleum and petrochemical products.”
On domestic demand, Affin Hwang Capital continued to expect Malaysia’s economic growth to be supported by private consumption, given healthy income growth and steady employment.
“Besides that, we believe private investment growth will likely recover amid the potential favourable export development and economic outlook in 2H19.”