PETALING JAYA: The Malaysian economy is set to recover in the second half of 2020, with no major economic crisis on the horizon, analysts say.
Alliance Bank Malaysia Bhd chief economist Manokaran Mottain said he expects the US-China trade talks to be completed by mid-2020, and this could lead to the rollback of additional tariffs imposed earlier.
“This will help lead towards the stabilisation of global macroeconomic conditions, and together with stronger commodity prices such as Brent crude oil and crude palm oil, Malaysia will likely benefit as a result.
“On the domestic front, the continuation of mega infrastructure projects and consumer spending will be a key support to the economy, ” he said.
Manokaran applauded the government’s decision to postpone the targeted petrol subsidy programme, which was originally supposed to start this month.
He said this deferment is expected to drive people’s purchasing power and consumption.
“Considering that crude oil price is on the rise, any move to float the RON95 petrol price will only cause Malaysians to pay more.
“At the current Brent crude oil price of US$67 per barrel, the retail pump price of RON95 could be 50 or 60 sen higher than the current price of RM2.08, if floated, ” he said.
Overall, he forecasts the Malaysian economy to grow by 4.5% in 2020, slightly lower than the government’s 4.8% official guidance.
This was mainly because the first six months will likely be challenging for the economy, before it recovers from July onwards.
Sunway University economics professor Yeah Kim Leng believed that a 5% growth is within reach in 2020, if both domestic and external engines of growth are in sync.For comparison, the government expected a 4.7% growth in 2019.
While economic growth is expected to improve, Yeah expects Malaysians’ wage growth to remain unequal across sectors, depending on firm productivity, profitability, cost inflation, pricing power and individual industry cycles.
“In a rising tide, more Malaysians, however, will be lifted – especially if the country’s investment rate picks up, and employment and wage growth quickens, ” he said.
On the Phase 1 trade deal between the United States and China, Yeah pointed out that the rollback of tariffs was less than expected.
However, the averted tariff escalation will sustain growth not only in the world’s two largest economies but also help to boost global trade and the interlinked countries, including Malaysia.
“The improved market sentiments and external outlook for Malaysia is expected to raise investor and consumer confidence, ” he said.
In its earlier outlook report, MIDF Research predicted Bank Negara would undertake another overnight policy rate (OPR) cut in the first quarter of 2020 in order to weather the pressure from both domestic and external fronts.
For context, the central bank had on May 7,2019 slashed the OPR to 3%, marking the first reduction since July 2016, to support local economic growth.
“We foresee the Malaysian economy to continue expanding in 2020, but at a slower pace of 4.5% compared to the 4.6% estimated for 2019 as there are more challenges ahead.
“Domestically, the sizable debt level which somehow bars the government from spending generously, expectations on rising inflationary pressure and slightly easing employment on top of currency risk could stifle private consumption.
“We foresee private consumption and the services sector to grow at a slightly softer pace of 6.5% year-on-year and 5.8% respectively, ” it said.
Did you find this article insightful?