Reviews of infrastructure projects and govt’s general foreign policy orientation are the issues affecting the numbers

By LYDIA NATHAN / Pic By MUHD AMIN NAHARUL

Malaysia’s economy in the first quarter of the year (1Q19) is not expected to report great numbers, mainly a result of external headwinds and various domestic issues.

One of the external headwinds that had affected the country was the US-China trade war that has since escalated. On the other hand, reviews of infrastructure projects for China’s Belt and Road Initiative and the government’s general foreign policy orientation were the issues facing the country in the first four months of the year.

According to AmBank Research, the nation’s GDP is expected to read at 4.1% with a downside of 3.8%.

The research firm, however, projected that the economy would likely experience moderate growth in 2019 with a base growth of 4.5% and a downside of 4%.

Another research house, Alliance- DBS Research Sdn Bhd, has projected the GDP to grow at 4.5% year-on-year (YoY), while maintaining its full-year forecast of 4.5% for this year.

AllianceDBS stated in its report that the total manufacturing sales had remained strong, expanding 5.7% in March 2019 to RM72.4 million from RM68.5 million in the preceding year.

“Nevertheless, March sales were mainly contributed by sales of manufactured refined petroleum products at RM11.6 million, and sales worth RM15.6 million in electronic components and semiconductor products,” it said.

Additionally, the Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) rose to 49.4 in April, making it the highest since September 2018.

“This was mainly attributed to an expansion in new export orders with demand mainly coming from Europe, the US, Singapore and Japan,” the report stated.

Meanwhile, Malaysia’s Industrial Production Index (IPI) showed an increase of 3.1% YoY in March 2019 compared to 1.7% in February 2019, driven by stronger manufacturing production supported by resource-based activities.

“Output in petroleum products grew 3.7% YoY from 1.6%, while textile grew 4.9%. Food, beverages and tobacco products were also higher at 6.8%,” AmBank Research said.

The overall higher output in the manufacturing sector grew 4.1% from 3.7% in February with a smaller loss of 0.2% in the mining sector.

JF Apex Securities Bhd said the IPI is expected to expand moderately this year, as most of the sub-sectors experience slight growth in tandem with slowing global economic growth.

However, it noted the manufacturing production will continue to be the main contributor to the IPI, driven by electrical and electronics products, but at a slower pace.

“Overall, we forecast the 2019 IPI to grow at 3% YoY. The performance for the IPI will be underpinned by an uptick in commodity prices, as well as sustainable global semiconductor sales.”

“However, we opine that the prevailing trade war between the US and China could derail the global trade, thus affecting our IPI performance,” JF Apex stated.

Hong Leong Investment Bank Bhd was also of a similar opinion, stating that the tariff hike could likely lead to increased uncertainty and a pullback in investments and trade activities in the near future.