Private investments to remain cautiously weak this year

  • Economy
  • Wednesday, 15 Jan 2020

KUALA LUMPUR: A dark cloud hangs over the Malaysian economy with the rapidly slowing growth of private investments.

The growth rate has been losing steam in recent quarters to 0.9% in the first nine months of 2019 and is likely to end the year lower at 0.8%.

The Socio-Economic Research Centre (SERC) expected private investments to remain cautiously weak with a growth rate of 2.2% as investors stay on the sidelines dur to the uncertain external environment, domestic leadership transition issue and policy uncertainties.

Growth rates have been decreasing from 9% in 2017 to 4.3% in 2018. Should 2019 end at a growth rate of 0.8%, this will be the slowest pace in nine years after contracting by 7.4% in 2009.

SERC said a strong revival in private investment growth is needed.

“The danger is that the persistent pullback on capital spending would take much of the steam out of the economy going forward and undermine capital formation.

“There are also worries that weak business investment and challenging economic conditions could constrain companies’ ability to continue hiring more workers and undermine consumer spending,” executive director Lee Heng Guie told a briefing of SERC’s quarterly economy tracker (October-December 2019) and 2020 outlook.

Despite various disruptions and uncertainties, especially the prolonged trade conflicts between the United States and China, Lee pointed out that Malaysia managed to withstand headwinds with an economic growth of 4.6% for the first nine months last year.

“Nevertheless, growth momentum had moderated from an annual rate of 4.9% in 2Q 2019 to 4.4% in 3Q as domestic demand cooled to 3.5% in 3Q 2019 from 4.6% in 2Q 2019 and 6.8% in 3Q 2018.

“Adding to growth pressure was continued sluggishness in exports, which had contracted by 2.1% from January to November,” he said, adding that GDP growth for 2019 is estimated at 4.6%, which is lower than the 4.7% in 2018 and 1.1 percentage points lower than the 5.7% achieved in 2017. The economy is expected to grow to 4.5% this year with domestic demand being the key pillar.

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