KUALA LUMPUR: United Overseas Bank Malaysia Bhd (UOB Malaysia) expects Bank Negara Malaysia to lower the Overnight Policy Rate (OPR) by 25 basis points to 2.75% in the first quarter of 2020.
“This is in line with a wider trend by global central banks to move preemptively to mitigate downside risk to growth and help offset the negative impact of the US-China trade tensions,” its senior economist Julia Goh said on Dec 5.
“UOB Malaysia will continue to spur the domestic economy amid the lingering trade uncertainties. We continue to support businesses particularly the SMEs; we also provide a lot of avenue for companies to hedge their foreign exchange risks,” she added.
Goh sees Malaysia’s economy growing at a slower gross domestic product (GDP) pace of 4.4% in 2020 due to external headwinds from rising the trade tensions and weakening global growth, stressing that the trade tension would be challenging for Malaysia in the first half of 2020.
“We think the tensions could persist going into 2020 and beyond tariffs into other areas in investment and technology.
“We also consider the potential tariffs to actually move beyond to other countries, and as well as geopolitical risks affecting other parts of the world, such as the Middle East and North Korea,” she told a media briefing here.
UOB Malaysia’s forecast of lower GDP growth for next year compared to 4.6% for 2019 could also be attributed to lower foreign and public investments that weigh down on domestic growth, Goh said.
Nevertheless, UOB Malaysia expects private sector spending, particularly in private consumption, to remain robust and support the country’s growth.
To date, private sector spending accounts for 77% of Malaysia’s GDP and contributes 4.5% to the country’s headline growth.
“Other growth drivers include the country’s stable macroeconomic fundamentals and a greater number of approved investments into Malaysia being realised in 2020.
“Greater government spending could also lend further impetus to growth in 2020, while Budget 2020 is an expansionary budget with RM3 bil worth of preemptive measures put in place to support the economy,” Goh said. – Bernama
