Malaysia’s Prime Minister Tun Dr. Mahathir Mohamad has announced the formation of Economic Action Council (EAC) to tackle the gripping economic issues the country is facing. Led by the prime minister himself, the EAC comprises of 16 members from the cabinet, public and private agencies and think tank leaders, as well as academicians appointed by the prime minister.
Formation of special bodies like EAC is not new in Malaysia, and Tun Dr. Mahathir assured that it should not become a concern to the public. Back in 1997 the premier had also set up a special economic committee to help Malaysia to overcome the Asian economic crisis at that time, which enabled the country to recover from the crisis at a faster pace compared to its neighbors in the region. Some of the previous economic committee members are also joining the current EAC.
Economists believe the move is timely, as it will help the government accelerate decisions for addressing many economic challenges, as the EAC can act as an advisory body to the cabinet. The formation of EAC will also facilitate the government to commence structural reforms, especially in reducing the government's role in the economy and allowing greater degree of autonomy to the private sector, putting the government back in the seat of regulatory role with minimal interventions in industries and markets.
(Sources: The Edge Markets; Malay Mail)
Malaysia is expected to experience slower growth in 2019, in anticipation of global trade uncertainties which would affect the trade flows to the region. While the government is more optimistic with 4.9% of GDP forecasted, consensus GDP growth forecast from Bloomberg data is milder at 4.6%. The World Bank on the other hand predicted that Malaysia’s real GDP will be 4.6% going into 2020, from 5.9% in 2017 and 4.7% in 2018 as well as in 2019.
Economists cited several downside risks pertinent to the cautious GDP estimates, including policy uncertainties, geopolitical tensions, volatile commodity prices, ongoing trade pressures and monetary policy normalization in the US. Nevertheless several measures announced in Budget 2019 are expected to sustain domestic demand, which in turn will remain supportive of the economy despite the expected slower export growth. The measures include increase in minimum wage, continuation of cash assistance and several instruments planned to ease the public’s burden from rising costs of living, which should encourage consumer spending. Households are expected to remain financially strong amid steady household earnings, positive employment outlook and steady commodity prices, on top of accommodative financing conditions and strong financial buffers to service debt commitments.
In addition to domestic demand, private investment is also expected to support the growth. Private businesses will benefit from the government’s decision to repay MYR 37 billion (USD 9 billion) of tax refunds and continuation of several infrastructure projects from the previous administration, which could lead to new investment and expansion activities by private sector.
(Sources: The Edge Markets; The Malaysian Reserve; The World Bank)
Malaysia announced an expanded budget for 2019 and forecast a larger fiscal deficit as new administration tussles with shrinking revenue and a large debt left by the previous administration. Below are some of the important budget allocations that been tabled by the Ministry of Finance:
(Source: The Star Online; Channel News Asia; Free Malaysia Today)
Malaysia's new government is currently restructuring agencies to be placed under new ministries, to ensure reduced overlap of functions. For example, the Export-Import Bank of Malaysia Bhd (Exim Bank) will soon be placed under Ministry of International Trade and Industry (MITI) alongside SME Bank Malaysia. Exim Bank is an agency under the purview of the Finance Ministry while SME Bank is under MITI. Such a move will allow Exim Bank to complement MITI's other agencies like Malaysia External Trade Development Corp in facilitating Malaysia’s global businesses by providing the necessary banking and credit support for cross-border business ventures. In addition, Invest KL Corp Sdn Bhd may also be under the purview of MITI as the government thinks that it can be better managed under the ministry, which has expertise in drafting international trade policies.
MITI is now proposing that a single agency should decide on investment decisions and perks to be offered to investors for the whole country. Currently, there is unhealthy competition among various investment promotion agencies, numbering between 30 and 40, under the purview of different ministries. MITI believes that the best way forward is to have one single agency to decide on the incentives for investors to improve efficiency and reduce the involvement of too many competing agencies. This will also help prevent investors bargaining for better perks.
MITI has provided assurances that both domestic and foreign investors will be given the right acceptable incentives, that would encourage them to create jobs and opportunities for Malaysians.
(Sources: The Star; FMT News; The Malays Mail)
A recent release from the Department of Statistics in Malaysia revealed that the tourism industry's contribution to the country's GDP (gross domestic product) increased to 14.9% in 2017, compared to 14.8% in 2016 and 14.4% in 2015. Inbound tourism expenditure, which contributed 53.7% of the sector value (MR 86 billion or USD 21 billion) grew by 6.1% during 2017, slower than the 9% growth recorded in 2016. This was attributable to a reduction in the number of international tourist arrivals from 26.8 million in 2016 to 25.9 million during 2017.
Shopping was the largest component of inbound tourism expenditure at 231.3%, with a value of MYR 26.8 billion (USD 6.5 billion)) in 2017. This was followed by accommodation MYR 20.7 billion or USD 5 billion (24.2%) and passenger transportation MYR 15.0 billion or USD 3.6 billion (17.5%) respectively.
The share of domestic tourism expenditure to the total tourism consumption expanded to 46.3% in 2017. Domestic tourism expenditure recorded MYR 73.7 billion or USD 18 billion, increasing by 10.8% from MYR 66.5 billion in 2016. This performance was supported by shopping and food & beverage serving services. The number of domestic visitors was 205.4 million (2016: 189.3 million) and Selangor witnessed the highest number of visitor arrivals. Outbound tourism expenditure grew by 14.2% to reach MYR 38.9 billion (USD 9 billion).
The tourism sector employed 3.4 million in 2017, contributing 23.2% to total employment in 2017. Bulk of the employment in tourism was from the retail trade industry (33.7%) and food & beverage serving services (32.3%).
(Sources: Department of Statistics, Malaysia; Malay Mail)
Small and medium enterprises (SMEs) contributed MYR 435.1 billion (USD 106 billion) last year (2017) to Malaysia's economy, reflecting an increase in their contribution to GDP from 36.6% in 2016 to 37.1% in 2017.
According to the SME Corp Malaysia the higher SME GDP growth was reflected across all major economic sectors, namely services, manufacturing and agriculture. SMEs' real GDP growth has consistently outperformed the overall GDP growth over the past 14 years (2004 - 2017), averaging at 6% per annum compared with the GDP's 5% growth.
The SME exports experienced improved growth of 8% in 2017 compared with 7% in 2016, due to higher exports in commodities, such as palm oil and rubber as well as manufactured products, particularly electrical & electronics. The exports by large firms registered a double-digit growth of 18%, due to the higher exports of electrical & electronics, liquefied natural gas and crude oil.
The employment by SMEs has also continued to strengthen, with the share of SME employment to total employment growing to 66% in 2017 from 65% in 2016.
The Ministry of Entrepreneur Development aims to further strengthen the economic contribution of SMEs focusing on acting as a facilitator to entrepreneurs and SMEs for establishing their business, and ensuring cooperation and strategic networking between the public and private sectors, along with planning and implementing activities to promote entrepreneurial culture. The ministry will also study the difficulties faced by SMEs in obtaining funding from financial institutions.
(Source: The Edge Malaysia; New Straits Times)
Malaysia could extend new tax incentives for foreign investment in key areas such as technology and research and development if companies promise to create better paid jobs for Malaysians. Speaking to Reuters, Tun Dr. Mahathir Mohamad, the Malaysian Prime Minister said that Malaysia welcomes investments from China or any other country if the companies are willing to commit to projects that would create high-income jobs for highly skilled Malaysian workers.
Malaysia is willing to offer an extended tax break beyond the current 10-year tax incentive to some cases of investments as its aim is to create jobs for Malaysians, especially high income, value-adding ones. Currently, the Malaysian Investment Development Authority (MIDA) allows foreign companies investing in Malaysia to claim income tax breaks for between five to 10 years.
The PM referred to the Alibaba Group’s opening of a new office in Kuala Lumpur on 20 June as an example of the kind of investment the governemnt desires to attract. The office is intended to serve as a one-stop solution centre for local businesses, engaging with existing local partners, helping Malaysian businesses identify global cross-border trade opportunities, and supporting technology innovation through cloud computing services. It will also offer training programs to enable SMEs and entrepreneurs to benefit from digital innovations and trade opportunities.
In November last year, a Digital Free Trade Zone (DFTZ) was launched in Malaysia through a collaboration between the Alibab Group and the Malaysian government. This is Alibaba's first Electronic World Trade Platform (eWTP) hub outside of China. The objective of the eWTP is to reduce barriers, making it easier for SMEs to expand their trading capabilities worldwide. The DFTZ aims to double the growth rate of SMEs' goods exports to reach USD 38 Billion and facilitate USD 65 Billion of goods movement via the DFTZ (exports, imports, transhipments) by 2025.
(Sources: Reuters, Free Malaysia Today)
The new Malaysian government led by Prime Minister Mahathir Mohamad will reintroduce the Sales and Services Tax (SST) beginning in September to replace the Goods and Services Tax (GST). The decision was announced following the reduction of GST rate from 6% to 0% beginning on 1 June, satisfying a campaign promise. In its general election campaign last May the coalition of opposition parties Pakatan Harapan pledged to abolish GST within its first 100 days as the government, if the coalition managed to win the election. The rate of the reintroduced SST however is yet to be disclosed.
The unpopular GST was first introduced in Malaysia on 1 April 2015 by the previous Prime Minister Najib Razak, and has been perceived by many as the main reason for the escalation in the price of goods and services in the country. Nevertheless in 2017 GST contributed to RM 42 billion approximately to the government’s coffers, becoming a significant income source in the midst of decreasing global oil prices and an unstable ringgit. The reintroduction of SST is seen as an effort by the new government to fill in the revenue gap left by reducing the GST rate to 0%. Malaysia currently has debt and liabilities exceeding MYR 1 trillion (USD 250 billion) and managing the debt is a priority for the new government.
(Sources: Berita Harian; Channel News Asia; Malaysian Ministry of Finance)
The World Bank raised its forecast for Malaysia’s economic growth in 2018 to 5.4%, an increase from the initial prediction of 5% made by the organization in last October. The raise is backed by sustained export growth enjoyed by the country in the first half of the year, in line with the rise of global trade. Similar sentiment is shared by HSBC Global Research in its Asian Economics report for Q2 of 2018, citing short-term benefits from strong trade growth and resilient domestic demand contributed by consumer-friendly budget and higher investment.
As a trading nation however the World Bank warned that the growth is very much vulnerable to shifts in external demand and financial market conditions. Malaysia is one of the major exporters of electrical goods and electronics, which constitute one-third of its total exports. A 9.4% growth rate in manufacturing wages was recorded in Q4 2017, at almost twice the rate of growth in the service wages sector. The country is set to become a high income nation between 2020 and 2024 according to the World Bank’s account.
Weak exports or shocks in global financial market may have negative spillovers in Malaysia, while the high level of public and household debt on top of uncertainties around the upcoming general election contribute to domestic risks to the economic growth, according to the World Bank. The economic growth could weaken to 5.1% and 4.8% in 2019 and 2020 respectively, while HSBC anticipated that the growth in 2019 would moderate to 4.7%. The country recorded a robust 5.9% year-on-year growth in 2017.
Malaysia continues to lead the Global Islamic Economy Indicator for the fifth year in a row due to its robust Islamic economic ecosystem, driven by a substantial lead in Islamic finance and halal food. Last year, Malaysia reaffirmed its position as the leading global halal hub with an annual export value of MYR 43.39 billion (USD 11.2 billion) for halal products. Malaysia’s halal product exports are expected to grow by 5% year-on-year to MYR 45 billion (USD 11.6 billion) in 2018. At the same time, the country has attracted in 2017 the investments worth MYR 13.3 billion (USD 3.4 billion) in HALMAS-certified halal parks – catering for the production of halal products – under Halal Industry Development Corporation (HDC).
To date, a total of 28,000 jobs have been created in halal industry, which have contributed about 7.5% to the nation’s GDP in 2017. With the world’s Muslim population of 1.8 billion continuing to grow, the opportunities of Islamic economy are bright.
The Thompson Reuter’s State of the Global Islamic Economy 2017 to 2018 report defines the Islamic economy as consisting of halal food, Islamic finance, halal travel, modest fashion, halal media and recreation, and halal pharmaceuticals and cosmetics. The global halal economy, according to the report, is projected to reach USD 3 trillion by 2021.
(Source: The Edge Markets)
In March 2018, the International Monetary Fund (IMF) released its latest report on Malaysia’s economy. According to IMF, Malaysia’s economy continues to perform strongly, with higher than anticipated growth at 5.8% in 2017, and projected growth of 5.3% for 2018. The country is considered to be well on its way to achieving high-income status. But to pass the finish line, the authorities need to step up reforms to boost productivity and raise living standards for its 32 million citizens.
IMF reports that Malaysia’s economy exhibits strong resilience and performance, with growth running above its potential, driven by strong global demand for electronics and improved terms of trade for commodities, such as oil and gas. On the domestic front, Malaysia’s strong employment is boosting private consumption, and investment is also helping to drive growth. Over the past three years, the federal government deficit was also reduced from 3.4% of GDP in 2014 to 3% of GDP in 2017, which has helped to bring down debt.
According to IMF, some of the key priorities under the 11th Malaysia Plan (2016-2020), which would likely help the country achieve high-income status, include increasing productivity, encouraging more innovation, and placing stronger emphasis on improving labor market outcomes and targets.
(Source: International Monetary Fund)
In 2017, Malaysia recorded approved investments of MYR 197.1 billion (USD 50.9 billion) in the manufacturing, services and primary sectors, from 5,466 projects. Domestic direct investments (DDI) accounted for the bulk of it or 72.2% at MYR 142.4 billion (USD 36.8 billion), while foreign direct investments (FDI) contributed MYR 54.7 billion (USD 14.1 billion), making up 27.8% of the total.
The overall investment performance moderated by 7.4%. This was due to lower approved investments recorded in the services sector which saw a decline of 17.2%, from MYR 146.2 billion (USD 37.8 billion) in 2016 to MYR 121.1 billion (USD 31.3 billion) in 2017. Nonetheless, the overall investment performance was bolstered by the manufacturing and primary sectors which recorded increases of 8.9% and 51.2% respectively. The qualitative aspects of investments attracted into Malaysia in 2017 were evident on many fronts, such as job and business opportunities as well as the transfer of technology.
More global companies are making Malaysia their hub. This includes Osram Opto Semiconductors' world's most advanced LED chip factory, B.Braun's Global Center of Excellence for Intravenous Access products which comprises production and R&D functions, Peugeot's ASEAN manufacturing hub, IKEA's Regional Distribution and Supply Chain Centre for ASEAN, Honeywell's ASEAN Regional Headquarters and Schlumberger which made Malaysia their largest shared services hub in the group in addition to their procurement service centre, human resource hub, financial hub and two regional hubs.
(Source: Malaysian Investment Development Authority)
According to the Ministry of International Trade and Industry (MITI), Malaysia’s total trade in 2017 recorded a stellar performance. The country’s imports grew by around 20% to MYR 838.14 billion (USD 214.2 billion), driven by higher imports of intermediate goods, but it was Malaysia’s exports that recorded the strongest performance. Its total exports grew by 19% to MYR 935.4 billion (USD 239 billion) in 2017 – the strongest growth since 2005 and a record high – underpinned by exports of electrical and electronics (E&E) segment and also major commodities. As a result, Malaysia’s trade surplus widened by 10.3% to MYR 97.25 billion (USD 24.9 billion), the largest surplus registered since 2012.
China continued to be Malaysia’s largest trading partner for nine consecutive years since 2009. ASEAN remained a key trading partner for Malaysia, taking up 27.5% of Malaysia’s total trade in 2017.
The increase was mainly led by manufactured goods, which grew by 18% and accounted for 89% of total exports to ASEAN.Electrical and electronic (E&E) products remained as the largest export sector last year, at 36.7% of the nation’s total exports worth MYR 343 billion (USD 87.7 billion). E&E products included electronic integrated circuits, computers and data processing equipment as well as parts and accessories for office machines. Other manufactured products that contributed to last year’s exports growth were petroleum products, chemicals and chemical products, rubber products, iron and steel products, manufactures of metal, optical and scientific equipment and transport equipment.
(Sources: The Star Online; BERNAMA)
Malaysia's Communications and Multimedia Ministry has formulated an 8-year roadmap to empower and strengthen the country's communications and multimedia sector. The Communications and Multimedia Blueprint (CMB) 2018-2025 will be rolled out in Q1 of 2018 and it aims to facilitate Malaysia's plan to become a high-income, inclusive and sustainable nation. CMB plans to achieve this by digitizing and humanizing the country as well as balancing the nation’s socio-economic development and embracing the advent of Industry 4.0 which signifies Malaysia's thirst to tap into the latest technologies to push growth in the country
The CMB consists of 6 strategic imperatives which are:
Within CMB’s plans include increasing high-speed broadband coverage to homes and businesses from 81% to 95% by 2025 as well as reach into rural and low-income areas. This CMB blueprint serves as a framework of policies and shared responsibilities; and should align with international and regional plans such as the ASEAN ICT Masterplan 2020 and the United Nations’ Sustainable Development Goals, especially in the context of addressing privacy and security issues.
(Source: The Malay Mail Online)
The World Bank said that Malaysia’s economy flourished through 2017 with a year-on-year growth of 5.8%. It is the highest annual growth rate recorded since 2014, backed by increased domestic demand, improved labour market conditions, wage growth and heightening external demand for its manufactured products and commodity exports. The World Bank projects Malaysia's economy to continue at a strong pace, between 5 and 5.5% in 2018.
On the trade front, Malaysia's total trade grew 21.5% to MYR 1.46 trillion (USD 483.5 billion) in the first 10 months of 2017 from the same period last year, with exports surging 21.1% to MYR 772.66 billion (USD 255.9 billion), while imports climbing 21.9% to MYR 692.51 billion (USD 229.3 billion). The main contributors to the growth was trade with Asean, China, the US, Hong Kong, Japan, the EU and Taiwan. Trade surplus of MYR 80.15 billion was recorded, higher by 14.4% compared with the corresponding period a year ago.
(Sources: World Bank; The Sun Daily)
Malaysia's Prime Ministry, Datuk Seri Najib Tun Razak, has recently tabled Budget 2018 proposal in Parliament. The proposed budget offers strong support to Malaysian SMEs and corporations, while setting a strong foundation for economic growth. The total budget allocation is RM 280.25 billion (USD 69 billion), a 7.5% increase from RM 260.8 billion (USD 64.2 billion) in 2017. This proposed budget is the last budget to be tabled by the Malaysian Prime Minister, before next year's general elections.
Among the highlights of the budget are an allocation of over RM 14 billion (USD 3.4 billion) for the Malaysian Armed Forces, of which RM 9 billion (USD 2.2 billion) is for the Royal Malaysian Police and RM 900 million (USD 221.6 million) for the Malaysia Maritime Enforcement Agency. Another RM 27 billion (USD 6.6 billion) is allocated for the healthcare sector which include RM 1.4 billion (USD 344.7 million) for facilities maintenance and upgrading and RM 50 million (USD 12.3 million) for Voluntary Health Insurance Scheme. Green technology sector is also a major beneficiary of the budget, with RM 5 billion (USD 1.2 billion) allocated for Green Technology Financing Scheme to boost green technology investments in the country.
(Sources: New Straits Times; The Edge Markets; Reuters)
Malaysia is geared towards a more fast-paced development as the country sees a shift towards high technology, knowledge-based, high value-added and capital-intensive economic activities. According to Prime Minister Datuk Seri Najib Abdul Razak, the country will focus on welcoming the rise of digital future. Malaysia is also focusing on maximizing the use of technology while nurturing local businesses to become globally competitive and key market players in the international economic arena.
Recently, Malaysia’s economic growth forecast was revised to nearly five percent by the World Bank and the International Monetary Fund (IMF). The Asian Development Bank revised its forecast for Malaysia's GDP for 2017 to 5.4% from its previous forecast of 4.7%.
Amid Pre-Budget 2018 deliberations, analysts anticipate the introduction of more incentives on economic development that use technology to meet the country’s aspirations to become a globally-competitive digital economy, as outlined in its latest 'Transformasi Nasional 2050 (TN50)' Plan, the country’s next long-term development program leading up to 2050.
(Sources: The Sun Daily; The Edge Markets)
Nielsen's Global Survey of Consumer Confidence and Spending Intentions reveals a positive improvement in consumer confidence levels in Malaysia, with Malaysia recording the highest increase across all South East Asian countries. While there remain key concerns on the state of the economy, job security, and food prices, overall Malaysians remain positive over their employment prospects and their financial status in the next twelve months. Many Malaysians are now indulging on big-ticket items, such as holidays/vacations, new clothes, out-of-home entertainment, home improvement and new technology products. However they do remain prudent about their spending habits.
Malaysians are benefiting from the bouyant economy, which has continued to grow at a rate well above the international average. The economy expanded by 5.8% in the second quarter of this year compared with the same period last year, the current account surplus widened, and investments rose by 7.4%. Latest figures also show that inflation is well under control, with the CPI registering a rise of just 3.2% in July 2017. The country's weak ringgit has helped to make Malaysia's exports cheaper and is providing foreign direct investors with an opportunity to establish a presence in the country at minimal cost.
(Sources: Nielsen; The Straits Times)
According to consultancy firm PwC's "The World in 2050", Malaysia will become the 24th biggest economic powerhouse by GDP in the world by 2050. The report cites various factors that are expected to help the country in its development, including the fact that the Malaysian government has taken concrete steps to strengthen the public finances, which is important for long-term sustainable growth.
The Malaysian government is successfully implementing initiatives to overcome key growth constraints. These initiatives range from infrastructure investment to human capital development. Infrastructure projects such as the Klang Valley MRT project are progressing well and, when operational, should deliver significant economic benefits through traffic congestion alleviation. Increasing the ability of workers and residents to move around the capital city more efficiently results in greater connectivity, creating deeper markets for people and ideas and thereby enhancing productivity. The country has a strong commitment to developing human capital and entrepreneurship. Malaysia is investing in job creation, improving education, enhancing the quality of labour, encouraging savings and developing a more inclusive economy. It is also striving to create a better business environment, and has put in significant efforts and commitment to enhancing Malaysia’s business environment.
Following the collapse of the Trans Pacific Agreement (TPPA), Malaysia has now shifted its focus to a new free trade bloc, the Regional Comprehensive Economic Partnership (RCEP). This is a mega Free Trade Agreement between 16 economies, including China, Japan, South Korea and India. The RCEP comprises 46% of world’s population, and contributes 24% to global GDP.
Malaysia has indicated its commitment to help finalise the RCEP by the end of 2017, together with the other participating nations, with the aim of increasing economic trade in Asia. Negotiations are currently aimed at ensuring uniformity in the regulations among the 16 nations to ease investments and trade in the region.
According to Khazanah Research Institute, the RCEP benefits Malaysia in that the market is geographically more relevant to Malaysia, which is signficant as it impacts transaction costs for businesses and investors. Additionally, with China and South Korea committing to greater tariff liberalisation for goods in the RCEP, Malaysia would be able to have greater market access for its local production. The RCEP would encourage more FDI for Malaysia from China and Japan, thus reversing the shrinking trend in FDI stock from the two countries. In addition, the RCEP will complement the efforts of ASEAN in becoming a single production hub, putting forth Malaysia on the investment radar of investors.
(Sources: Penang Institute; Universiti Sains Islam Malaysia; Khazanah Research Institute; New Straits Times )
In 2010, Malaysia introduced its New Economic Model, designed to transform the country into a high income nation. In a recent speech, the country's Prime Minister shared its report card with the nation. Between 2009 and 2016, Malaysia's Gross National Income increased by nearly 50%, and GNI per capita using the Atlas method increased to US$9,850. Based on the World Bank’s latest high income threshold of US$12,235, Malaysia has narrowed the gap towards the high income target from 33% to 19%. 2.26 million jobs have been created, while inflation and unemployment have been kept low.
(Source: The Star)
The World Bank on June 5 released its bi-annual Global Economic Prospects report and revised Malaysia’s GDP forecast for 2017 by 0.6% to 4.9% from its January prediction at 4.3%. The upward revision is also specified for 2018 and 2019 at 0.4% and 0.5% respectively, signaling its confidence in the country’s economy. Similarly research houses including Citi Research and UOB Bank Malaysia have also revised their forecasts for Malaysia’s 2017 GDP growth to 5.0%.
The improving global trade environment is seen as the driver for the upward revision, as Malaysia recorded an increase of export by 24.1% in the first quarter of the year propelled by increasing import demand from advanced economies and growing trade flows with China. The country logged an increase of 12% in export to the US, 18% to Japan and 22% to the EU, while total trade with China expanded by 34%. In line with the positive sentiment Malaysia is expected to achieve its target to become a developed economy by 2020.
(Sources: The Straits Times, Bernama, The Malay Mail Online)
Malaysia recorded 5.6% growth in GDP in the first quarter of 2017, its fastest expansion since 2015. The growth recorded is 1.1% higher than the preceding quarter, while quarter-on-quarter growth is tied at 1.5%, an increase from the previous 1.4%.
According to Bank Negara Malaysia (BNM) the growth is spurred by stronger domestic demand especially from the private sector spending, while the supply side is boosted by manufacturing and services sectors. The current account surplus has narrowed to MYR 5.3 billion (USD 1.2 billion) in January-March 2017. Private consumption expanded by 6.6% while investments rose by 12.9% due to continuous capital spending in both services and manufacturing sectors. The implementation of a number of big-scale projects in manufacturing sector is boosting investments in machinery and equipment for the quarter. Sustained domestic demand together with improvement in exports as global trade starts to accelerate will continue to drive the growth of Malaysia’s economy throughout the year.
(Sources: The Star, Financial Times, Channel News Asia)
The Malaysian government has established 5 economic growth corridors to further develop Malaysia’s strategic investments regions. Malaysia’s five corridors had their very own clear and concise visions, focus and own authority to oversee the developments in their specified region. The five economic regions are: Iskandar Malaysia in Southern Johor (IRDA); Northern Corridor Economic Region (NCER); East Coast Economic Region (ECER); Sabah Development Corridor (SDC); and Sarawak Corridor of Renewable Energy (SCORE).
This month the blueprint for the Northern Corridor Implementation Authority (NCIA) was unveiled. This aspires to transform Peninsular Malaysia’s four northern states into a world-class economic region with an economy worth MYR 300 billion by 2025. The goal, if achieved, could create more than 160,000 job opportunities in Perlis, Kedah, Penang and Perak in the lucrative sectors of services, manufacturing, agriculture and bio-industries. The blueprint lays out the socioeconomic development and growth plans that will be undertaken and implemented from 2016 to 2025.
(Sources: New Straits Times, Malaysian Administrative Modernisation and Management Planning Unit (MAMPU))
Malaysia has launched the world’s first Digital Free Trade Zone (DFTZ) this month. DFTZ will provide physical and virtual zones to facilitate SMEs to capitalise on the convergence of exponential growth of the internet economy and cross-border eCommerce activities. The physical zone comprises of the eFulfillment Hub and Satellite Services Hub while the virtual zone consists of the eServices Platform. DFTZ will act as a microcosm to support internet companies to trade goods, provide services, innovate and co-create solutions. DFTZ is expected to be a boost to Malaysia’s eCommerce roadmap that was introduced in 2016, which aims to double the nation’s eCommerce growth and increase the GDP contribution to MYR 211 billion (approximately USD 47.68 billion) by year 2020.
Consumer prices in Malaysia rose at the fastest pace in more than eight years in February 2017, adding to the central bank's policy dilemma as it tries to keep interest rates low to support the economy. The consumer price index (CPI) rose 4.5% in February 2017 from a year ago, exceeding the median estimate of 3.9% in a Bloomberg survey of 23 economists and the highest forecast of 4.3%. Malaysia's central bank, Bank Negara Malaysia, attributes the rise to higher fuel costs, and does not seem to be unduly worried, claiming that an adjustments in domestic fuel prices is to be expected. The central bank said in its annual report released this month that inflation will probably average 3% to 4% in 2017, up from 2.1% in 2016.
(Sources: Bloomberg, The Straits Times)
International investors acknowledged Malaysia’s resilient economic condition in weathering global uncertainties and displayed enthusiasm to invest in the country, amid strong confidence that the country would continue to do well in 2017. Among the sectors targeted include digital economy, which saw an improvement in new investments from USD 1.05 billion in 2015 to USD 1.5 billion in 2016. Malaysia continues to commit to pro-growth policies, including focusing on investing heavily in its infrastructure development to enhance connectivity within and beyond its border and hence improving its competitiveness in the region. As it continuously seeks to improve investment attraction the government is adopting a holistic strategy by working closely with consulting firms, banks, private companies and diaspora.
(Source: The Sun Daily)
Foreign direct investment (FDI) in Malaysia posted a net inflow of RM43.4 billion in 2015. Asia was the main source of FDI flows at 64.7%, followed by Americas (16.4%) and Europe (14.1%). The main countries of FDI flows in Asia were Japan and Singapore. Manufacturing sector was the main recipient of FDI flows (39.4%) in 2015. This was followed by Mining & quarrying (30.4%) and Services sector (27.7%).
As at end of 2015, FDI investment were channelled mainly in Services (47.1%) and Manufacturing sector (43.7%). These sectors collectively accounted for 90.8% or MYR 458.8 billion (USD 106.9 billion). In 2015, investment income was mainly generated by Manufacturing sector of 53.8% and Services sector was the second contributor of 35.1%. These two sectors contributed to 88.9% or MYR 45.6 billion to total FDI income.
(Sources: Department of Statistics, Malaysia)
Malaysia recorded 4.3% growth rate of GDP in the period between July and September compared to 4% in the preceding quarter. This also marked its first uplift after five subsequent quarterly decline. However the performance is slower compared to 4.7% recorded in the Q3 2015. Quarter-on-quarter performance nonetheless improved by 1.5% for Q3 compared to 0.7% recorded for Q2.
On sectoral growth, Bank Negara Malaysia revealed that manufacturing expanded 4.2%, services 6.1%, construction 7.9% and mining 3.6%. Agriculture on the hand declined 5.9%. Current account surplus was recorded to increase by 2% contributed by surplus of goods.
The expansion in manufacturing activities is supported by export-oriented industries, while the services sector was driven by private consumption activity. Civil engineering activity drove the construction expansion, whereas higher crude oil production hastened the growth in mining sector. The contracted growth in agriculture was largely due to the delayed impact of El Nino on crude palm oil (CPO) yields.
(Source: The Star)
The World Bank has revised its forecast of Malaysia’s 2016 GDP growth to 4.2% compared to 4.4% in April, attributing the slower growth to weaker global demand of oil and manufactured exports. In 2015 the GDP growth was recorded at 5%. The trend is expected to improve in 2017 and 2018 on the pretext of the recovery of oil prices and export goods that is currently taking place, allowing for the country’s economy to rebound in the period. Economic growth in the East and Asia Pacific region is expected to remain resilient in the next three years, with growth rate expected to be at 5.8% this year and 5.7% in 2017 – 2018.
(Sources: The Star; Bernama)