MALAYSIA is likely to enjoy sustained investment growth this year and benefit from an improvement in external conditions, Standard Chartered said.The country, one of Asean’s strongest domestically driven economies, is likely to enjoy more broad-based growth in 2013, the bank said.
“We forecast that gross domestic product growth will slow to 4.7% this year from 5.6% in 2012, entirely due to base effects,” it said in a Standard Chartered Asia Focus report here today.
The bank said the divergence between Malaysia’s domestically and externally driven growth paths will narrow this year, adding that improved trade conditions should bring an improvement to the current accounts.
It said financial and business services will remain an important pillar of growth, while agriculture, mining and manufacturing will increase their contributions after a weak year in 2012.”Our upbeat views are in line with the results of the corporate surveys we conducted in the region in January.
“Forty-one per cent of our respondents in Malaysia expect their businesses to perform better this year, versus 24% in 2012,” Standard Chartered said.The bank said 37% of respondents are concerned about sustaining business revenue growth versus 60% in 2012, with the challenges now shifting to rising costs and regulatory/policy uncertainty.
Standard Chartered said there is a marginal pick-up in export growth momentum in the first quarter but the external outlook should improve as the year progresses.Its recent study showed that the external outlook only remains cloudy in the near term.
The bank said the Economic Transformation Programme should help to sustain domestically driven investment growth and consumption may suffer from a high base effect after wage hikes and fiscal transfers provided a boost last year.
Meanwhile, the fiscal impulse should be smaller, as the government targets a fiscal deficit of four per cent of gross domestic product, Standard Chartered said, adding it expects inflation to climb to 2.6 per in 2013 cent from 1.7% last year.
“It is still low relative to some of Malaysia’s neighbours as it has been relatively well managed under the government’s Administered Price Scheme,” the bank said.
Given that inflation should trend higher during July-December 2013 due to the minimum wage implementation, subsidy rationalisation and strong domestic economy, the overnight policy rate will likely be hiked by 25 basis points in the fourth quarter of 2013, it said.
On the ringgit, Standard Chartered is more bullish in the medium term, as China’s recovery, an expected pick-up in palm oil prices and a rebound in the global electronics cycle are likely to boost the currency.
“Moreover, a weaker Japanese yen will benefit Malaysia given its commodity exports to Japan and its machinery imports from Japan,” it said, adding in the short term, heavy positioning and the Japanese yen’s weakness are likely to introduce volatility to the ringgit
Malaysian Employment Daily 