Challenges loom for country’s economy


The economic growth in the second quarter of 2018 (2Q18) came in very low due to lower government spending, as well as steep deceleration in the net export growth, said Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid (picture).

“However, the slowdown was mitigated by the sharp 8% growth in consumer spending which pretty much is in line with the surge in Consumer Sentiment Index, which currently stands at a 21-year high,” he told The Malaysian Reserve.

“At 4.5%, the economy is growing below trend and challenging prospects due to the trade friction and the lag effect of the monetary tightening, which are expected to have material effects to gross domestic product (GDP) growth in the second half of 2018 (2H18).

“So, the GDP forecast revision by Bank Negara Malaysia reflects greater uncertainty on how the Malaysian economy would evolve going forward,” Mohd Afzanizam added.

ForexTime Ltd global head of currency strategy and market research Jameel Ahmad said the 4.5% GDP growth will also likely accelerate some underlying concerns that the overall growth outlook for the Malaysian economy in 2018 will need to be readjusted lower.

“We are also starting to see what could be a trend of emerging-market growth in the South-East Asian region trending lower.

“Fears are also re-emerging that China’s economy is cooling down after data this week showed that fixed asset investment in China is growing at its weakest pace ever,” he said in a statement last week.

MIDF Amanah Investment Bank Bhd predicts Malaysia’s economy to expand by 5.2% this year, given the upbeat performance of the domestic and external trade sectors, based on the current developments and indicators.

“Malaysia’s GDP growth expanded by 4.5% year-on- year (YoY) in 2Q18, below our forecast of 4.9% YoY and market expectations of 5.2% YoY. It is the weakest growth in six quarters and less than the previous year’s average of 5.4%.

“We opine the slowdown in GDP growth was in tandem with moderating performances of industrial production, manufacturing sales, distributive trade and external trade during the quarter.

“Moderating inflationary pressure, strengthening domestic demand and accommodative economic policies, as well as strong re-exports growth are expected to be major drivers for GDP performance in 2H18,” MIDF Research said in a recent note.