Malaysia Economic Forecast

Malaysia Economic Outlook

December 13, 2018

The economy expanded at a fractionally slower pace in annual terms in the third quarter compared to the second quarter, owing to a drag from the external sector. Nevertheless, economic growth remained robust, underpinned by domestic demand. Private consumption performed particularly well and benefited from the zero-rating of the goods and services tax on 1 June; however, foreign demand for Malaysian goods eased markedly and net exports subtracted from the economy as a result. Looking at the final quarter, available data sends mixed signals. While the manufacturing PMI dropped further below the crucial 50-point mark in November, the external sector’s performance improved in October and registered the largest trade surplus in seven years amid strong export growth. Meanwhile, in early December, Malaysian police filed criminal charges against five people—including the former prime minister—over the 1MDB scandal, which saw large sums of money being swindled from a government fund. This could increase political tension and instability.

Malaysia Economic Growth

Economic growth is expected to remain robust in 2019, although the pace of growth in the economy is seen moderating slightly from 2018. Domestic demand should firm up on solid government consumption and stronger growth in fixed investment. However, household consumption growth will likely ease after a strong 2018. Meanwhile, the uncertain impact of the more expansionary fiscal stance on government finances, lingering trade tensions and financial market volatility all threaten the outlook. FocusEconomics Consensus Forecast panelists expect the economy to grow 4.6% in 2019, which is down 0.1 percentage points from last month’s forecast, and 4.4% in 2020.

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Malaysia Facts

Bond Yield4.070.15 %Jan 16
Exchange Rate4.110.0 %Jan 16
Stock Market1,673-0.29 %Jan 16

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