ADB maintains forecast of Malaysia’s 2019 GDP at 4.5%

by NG MIN SHEN / pic by TMR FILE

THE Asian Development Bank (ADB) maintained Malaysia’s economic growth forecast, but revised the growth outlook for South-East Asia as global challenges continue to send tremors through the region.

The bank expects Malaysia to see a GDP growth of 4.5% for this year and 4.7% for 2020. Malaysia posted a GDP growth of 4.5% for the first three months of this year, lower than the 4.7% recorded in the October through December 2018 period.

Many economies in the region, except for Malaysia, had posted lower economic growth in the first quarter of this year (1Q19).

In its Asian Development Outlook Supplement for July 2019 released yesterday, ADB said Malaysia’s economic developments continue to move in line with its expectations.

Strong domestic consumption offset weaker investment and exports, as external demand softened for Malaysia’s biggest exports — electronic and electrical goods.

“Private consumption growth remained impressive in the quarter at 7.6%, with public consumption growing by 6.3%. Meanwhile, weakness in fixed investment became more pronounced in 2019 with the government’s decision to review and renegotiate large infrastructure projects,” ADB said.

Growth in exports of goods and services came in lower than expected, while growth in imports of goods and services improved “but remained tepid”.

For the region, the bank said recent data “suggest that South-East Asia grew less than anticipated”, resulting in downward revisions to the growth forecasts, now at 4.8% for 2019 and 4.9% for 2020.

It also cut its inflation expectations for the region from 2% to 1% for this year, and from 2.7% to 2% for 2020, reflecting lower inflation projections for Malaysia and the Philippines.

“Malaysia experienced deflation in the first two months of 2019, such that average deflation in the four months to April was 0.2%. This was partly reflected by the removal of the Goods and Services Tax and the introduction of subsidies from the middle of 2018,” ADB said.

For East Asia, ADB lowered its growth projection to 5.7% for 2019 from 5.6% previously, on account of slower than expected expansion in South Korea, as GDP there grew just 1.7% in 1Q19 compared to 2.9% in 4Q18 due to weaker investment and exports.

The bank also revised its growth forecast for developing Asia — excluding Hong Kong, China, South Korea, Singapore and Taipei — down to 6.1% for this year, while maintaining its 2020 outlook at 6.1%, as it expects the region to maintain strong yet moderating growth amid US-China trade tensions.

The combined growth forecast for major industrial economies — the US, Europe and Japan — are maintained at 1.9% for this year and 1.6% for 2020, with upward revisions to US growth prospects offset by downward adjustments to euro-area growth projections.

“Deepening trade tensions still constitute the main risk to the outlook. Until the two sides (China and the US) reach an agreement, trade tensions will continue to weigh on the regional outlook,” ADB stated.