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Malaysia’s economy is in good position, says BMI Research

Via Malay Mail Online : KUALA LUMPUR, May 22 — BMI Research maintained today its 4.7 per cent real gross domestic product (GDP) growth forecast this year amid a brightening external and domestic outlook.

The Fitch Group company highlighted the receding risks of rising global protectionism and stabilisation of oil prices, as well as apparent recovering domestic demand and the ruling Barisan Nasional’s (BN) progress in resolving internal divisions.

“The strong global demand for semiconductors and higher oil prices will be positive for exports.

“In addition, the improvement in the domestic political outlook will be positive for the business environment while domestic demand is showing signs of recovering,” said BMI Research.

Malaysia recorded an unexpectedly strong GDP growth of 5.6 per cent in the first quarter of this year from 4.5 per cent in the previous quarter, with Bank Negara Malaysia crediting it to a substantial increase in domestic demand and investment from the private sector.

BMI said the 5.6 per cent growth in Q1 this year, marking the fastest pace of growth in seven quarters and coming in well above consensus estimates of 4.8 per cent, suggested that the economy has gained some traction after last years’ challenging external conditions and domestic political uncertainty.

“In addition, the strong global demand for semiconductors will provide tailwinds for manufacturing and investment in the electronics sector,” it said.

BMI also noted that the domestic economy was showing signs of recovery, highlighting a rise in automobile sales since January that grew by 10.1 per cent year on year in March.

“In addition, we are starting to see signs of a return in consumer confidence and believe that the effects of a weaker currency and the 6.0 per cent goods and services tax (GST) that was implemented in 2015 are slowly wearing off,” said BMI.

The research firm also said continued improvements in Malaysia’s political outlook would benefit the business environment, highlighting Umno’s apparent progress in uniting its members after the ruling party’s 71st anniversary celebrations earlier this month.

“The show of unity stands in stark contrast to the deepening divisions within the opposition Pakatan Harapan (PH) coalition, which continues to suffer from a lack of leadership amid its contentious relations with Islamic party, Parti Islam Se-Malaysia (PAS).

“With Umno and BN appearing to have put their previous scandals somewhat behind them, we expect this to be positive for investor confidence and expect investment to pick up over the coming months,” said BMI.

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