Currency, growth in manufacturing to support continued economic growth
Malaysia’s competitive currency, growth in manufacturing activity and a resumption in infrastructure projects are expected to support continued economic growth.
According to Deloitte’s latest Voice of Asia report, strong domestic demand led by household spending underpin Malaysia’s economic resilience, and its exports have outperformed.
“Its competitive currency, growth in manufacturing activity and a resumption in infrastructure projects are expected to support continued economic growth,” the report revealed.
The Asian economy is set for a rebound in 2020 as some of 2019’s export headwinds ease, policymakers pro-growth policies reinvigorate domestic economies, Southeast Asia continues to emerge as a global powerhouse, and consumption remains a bright spot, according to the report.
However, the report argues, three main downside risks must be contained for this predicted rebound to emerge. That is, economies should avoid excessive stimulus that could cause a boom-bust cycle, US policy needs to remain stable, and financial risks, particularly from quantitative easing, need to continue to be reined in.
In Southeast Asia, pro-growth policies have been encouraged by rate cuts in the US and Europe, and economies including Indonesia, the Philippines, Malaysia and Singapore are expected to increase spending on public projects as a proportion of gross domestic product (GDP).
“There are also positive signs on the trade integration front,” Deloitte Asia Pacific Clients and Industries leader Vivian Jiang said.
“The Comprehensive and Progressive Trans-Pacific Partnership gives its 11 members, including four Asean economies, enhanced market access, and the Regional Comprehensive Economic Partnership will reduce export-import paperwork and has introduced a limited degree of service sector liberalisation.”
Addressing specific sectors, the report suggests the automotive and aviation sectors will be bright spots after a period in the doldrums, with electronics another highlight.
“The decline in the automotive sector since 2018 was caused by factors including new emission standards in several markets, and other restrictions on production,” Vivian said.
“This decline is likely to reverse this year, with a further boost from continued luxury sales volume growth. Problems in the aviation sector are likely to ease as well, and there are signs of a resurgence in semiconductor billings, which should boost the electronics sector to help drive regional exports.”
On consumption, the report suggests, Asia can look forward to increased demand driven by labor market stability, increasing remittances, and easing monetary conditions.
“China’s consumer story remains intact even as household leverage continues to increase,” Deloitte China chief economist Sitao Xu said.
“High debt is bound to limit people’s ability to consume, and banks’ non-performing loans could rise if home prices decline, but there tends to be more willingness among Chinese parents to help out their families if debt does become an issue.”
The Voice of Asia report is also positive on prospects for the infrastructure sector, which is increasingly emphasised by governments across the region. In Indonesia, the Philippines, Malaysia and Singapore, public works spending is rising as a proportion of GDP.