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MALAYSIAN Rating Corp Bhd (MARC) expects the country’s real GDP growth to decelerate to 4.3% in 2020 due to weaker external trade performance and softer domestic demand growth.

MARC said in a statement yesterday that although trade diversion arising from trade tensions between the US and China could marginally benefit Malaysia in the short term, the overall weakening of global trade growth will continue to weigh on its export sector.

“Forward indicators suggest a lacklustre outlook such as a continuing downtrend of the export orders index of the US Manufacturing Purchasing Managers’ Index and a continuing contraction in global semiconductor sales,” it said.

MARC’s estimate is below the government’s forecast of 4.8% of GDP growth this year.

Domestically, MARC said Malaysia remains largely dependent on its consumer support, which contributed around 93% of headline growth in the first three quarters of 2019.

This is sustainable, and the latest statistics are already showing increasing cautiousness among consumers from recent surveys, said the rating agency.

The labour market remains stable and supportive of consumers’ spending behaviour, which MARC predicts private consumption growth to soften to 6.5% this year.

Economists, however, have recently said Malaysia’s GDP will register at a moderate growth this year, courtesy of the services and manufacturing sectors.

The Socio-Economic Research Centre ED Lee Heng Guie (picture) told The Malaysian Reserve that despite tensions from the US-China trade war that could lead to a global recession, Malaysian economy would continue to grow and meet the 4.5% growth projection.

“I believe the US and China trade deal definitely will ease off some economic burdens on our economy, and the receding risks of a global recession will lift our growth trajectory.

“We are going to expand and our growth will still mostly rely on domestic consumption,” he said.

A report by the World Bank last December stated that Malaysia’s economic activity was projected to grow at a relatively moderate pace in 2020 amid increased headwinds.

Subsequently, due to weaker investment and export growth in the third quarter of 2019, it revised Malaysia’s growth forecast from 4.6% to 4.5%.

Meanwhile, MARC expects headline inflation numbers to rise modestly to an average between 1.2% and 1.7%, assuming that the abolishment of fuel price ceilings takes place in 2020.

“Weaker domestic demand will keep inflation below the long-term trend.

“An alternative inflation indicator — the GDP deflator — also shows that a benign inflation environment is likely in 2020. In the first nine months of 2019, the deflator fell by an average of 0.2% year-on-year,” it said.

News Source: The Malaysian Reserve, 8th January 2020.

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