DESPITE challenging external headwinds, AllianceDBS Research expects Malaysia’s gross domestic product (GDP) to expand 4.5% year-on-year in 2020 with economic performance being supported by expected improvement in investment and rebound in export growth.
The government expects the economy to expand by 4.8% in 2020, mainly driven by private consumption, which makes up more than half of the gross domestic product (GDP) share every quarter.
The World Bank recently revised downwards global growth for 2020 from 2.7% to 2.5%.
The 2019 growth is estimated as the lowest expansion rate since the 2007-09 financial crisis due to declining global investment and trade.
However, gradual recovery in investment and trade is expected to push the 2020 growth moderately.
Advanced economies are estimated to register a slower growth of 1.4% in 2020 (2019e: 1.6%) attributed to weak manufacturing activity.
Emerging markets and developing economies (EMDEs) are projected to grow at 3.5% in 2019 and 4.1% in 2020 mainly due to the expected slowdown in China, from slowing investment and exports.
However, the economy is expected to recover moderately in 2020 and stabilise at an average of 4.4% between 2021 and 2022.
After almost two years of tariff slapping and trade sanctions between the US and China, for the first time both have signed the first phase of a trade agreement.
Generally the news sketches a positive outlook and recovery of global trade momentum.
It will positively affect Malaysia’s external trade which has been performing weakly. The US will lower tariffs and China agreed to purchase more US goods under the deal.
However, India recently proposed to ban all imports of Malaysian palm oil and palm oil-related products following our prime minister’s remarks on Kashmir and India’s new citizenship law.
Palm oil sanctions among Indian palm oil buyers are still under discussion.
Palm oil exports to India have been experiencing resilient growth over the past few years. In 2018, India imported 2.51 million tonnes (+23.6% year-on-year) mainly due to Malaysia’s crude palm oil (CPO) export duty suspension (January-April 2018) and 0% CPO export duty (September-December 2018)
Last year, Malaysia’s palm oil exports to India expanded by 76% to 4.41 million tonnes.
In September, India raised the tariff on Malaysia’s refined palm products to 50%, eliminating any trade advantage with Indonesia.
As such, Malaysia may lose its market share to Indonesia (given that the price discrepancy between the two suppliers may narrow due to the switch in demand from India). – Jan 21. 2020
