Malaysia’s GDP growth to remain unchanged at 4.5% this year, says StanChart

By Chee Jo-Ey

STANDARD Chartered Bank expects the country’s gross domestic product (GDP) growth to remain unchanged at 4.5% in 2020.

Although there are positive signs like the de-escalation of the US-China trade war, loose global monetary conditions and a pick-up in electronics manufacturing, a slower pace of consumer spending is expected.

“Consumption is likely to remain the biggest source of support for growth but is expected to moderate from a high base to around 6.2% next year, from 7.3% in 2019,” says Standard Chartered Bank chief economist Asean and South Asia Edward Lee.

The labour market, while still healthy, is softening and is likely to weigh on consumption as well.

Public investment has dragged overall investment lower in 2019 as various projects have been renegotiated. Private investment has not fared much better.

Overall investment may recover slightly in 2020 amid trade war de-escalation and the resumption of public infrastructure projects.

Standard Chartered expects the ringgit to remain range-bound. It forecasts the USD-RM exchange rate at 4.15 at end-2019 and 4.05 at end-2020. Its view of a slight ringgit appreciation is driven by reduced tail risks from the US-China trade war.

Meanwhile,  2020 will be a year of soft but stabilising growth for the global economy, according to the financial institution. It forecasts global growth at 3.3%, slightly higher than its 3.1% estimate for 2019.

Standard Chartered believes there will be more positive news on US-China trade in 2020.

It expects China’s economy to stabilise at the minimum growth of 6.1% required to double its GDP this year.

The Chinese government has pledged to double GDP in real terms between 2010 and 2020, a year before the 100th anniversary of the Communist Party. 

Meanwhile the US economy is expected to decelerate further to 1.8% in 2020.

The cyclical positives for global growth are the lagged impact of the global “dovish wave” by global central banks in 2019, fiscal support from China and India, the likely improvement in the electronics cycle and the likelihood of a US-China trade deal in 2020.

Although the institution is bullish on global growth, it notes that we still face three long-term structural drags, specifically debt overhang, demographic decline and deglobalisation in the 2020s. – Jan 15, 2020

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