‘ECONOMIC DIRECTION CLEARER NOW’
Analysts expect GDP growth, ringgit to strengthen this year after ‘chaos’
MALAYSIA’S economic direction is clearer now after the “chaos” that followed the change in government temporarily dampened investors’ confidence, said analysts.
Some also expect the ringgit to edge higher against the US dollar in the coming months, with Singapore-based OCBC Bank projecting it to trade above 4.1600 by year end.
MIDF Research said in its latest third-quarter market strategy report the country expected better growth this year than the 4.7 per cent achieved last year.
“As Malaysia currently focuses on free market, quality investment and high productivity, it will have significant impact on economic growth.”
MIDF Research expects the economy to expand 4.9 per cent this year. This would be driven by steady domestic demand amid a lower key interest rate, low inflationary pressure, stable job market and positive progress in
the construction sector.
The firm said the resumption of infrastructure projects, such as East Coast Rail Link, would restore investors’ confidence and trust in the market, translating into investment flows.
Nevertheless, it said economic growth this year would be influenced by internal and external factors such as the global slowdown and financial instability, threat of protectionism, volatility of commodity prices and labour market conditions.
The gross domestic product growth of 4.5 per cent in the first quarter had exceeded market expectations, it added.
On the Asian economy, OCBC economist Terence Wu said the macro outlook continued to be uninspiring as the United StatesChina trade conflict remained a potential flashpoint and might impinge on the macroeconomic readings further.
“The hope is for recovering China to act as an anchor of stability, and for growth to pick up sufficient momentum to filter down to the rest of the Asian economies. This scenario, however, is predicated on the trade tensions blowing over,” he said in a statement.
Wu said Asian central banks were now more open to rate cuts to support growth impetus.
Asian central banks may also be encouraged by the posture shift of the US Federal Reserve and other major central banks.
Nevertheless, OCBC expects the easing bias to be carefully calibrated so as to avoid undue concerns over the macro picture and prompt risks of capital outflows.
Given the spectre of a trade war and soft economic outlook, there might be few positives for Asian currencies as a whole, it added.