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)