PETALING JAYA: While the Malaysian economy may not be as sluggish as initially feared, there is little optimism that the country will be able to do better than last year.
Leading indicators, which economists say are an accurate gauge of economic performance in the months ahead, signalled a pick-up in growth towards the end of the second quarter.
However, concerns remain about the country’s performance in the period leading up to that point, and ultimately whether Malaysia will be able to achieve its projected 4.9% gross domestic product (GDP) expansion this year.
These concerns stem from various factors, domestic and global, which hint of an impending economic slowdown.
For one, the country’s leading index (LI), while it has begun to improve, still remains in the negative, according to data from the Statistics Department.
The composite of LI is designed to monitor the direction of economic performance for an average of four to six months ahead.
“Things are not looking good and those numbers indicate we are entering a recessionary phase,” said an economist with a local bank.
While the government last month forecast a GDP expansion of 4.9% this year, others are not as optimistic.
A recent report by the International Monetary Fund is forecasting a flat growth of 4.7% in 2019, saying that risk to the growth outlook were to the downside and “stem largely from external factors”.
Bloomberg data shows a forecast of 4.5% growth this year, while the Institute of Chartered Accountants in England and Wales’ (ICAEW), in its latest Economic Insight: South-East Asia report, said Malaysia’s GDP was expected to grow at 4.4% in 2019 on the back of a difficult export environment.
Concerns over the country’s economic outlook are further compounded by external factors, such as uncertainties surrounding the US-China trade war, which continues to persist, impacting the global trade momentum.
Meanwhile, slowing economic data triggered an inversion in the US treasury yield curve yesterday, leading to a bloodbath in global markets over fears that the US was in danger of falling into recession.
Bursa Malaysia, meanwhile, tracked the global sell-off as sentiment for equities soured, with losses on index-linked counters pushing the market barometer FBM KLCI to close lower by 17.51 points, or 1.05% at 1649.15.
On the bright side, the latest LI figures indicate that Malaysia’s economic performance will improve between May and July this year.
Data showed the monthly LI indicator in January 2019 increased by 1.3% to 118.9 points from 117.4 points in December 2018.