2012-11-15 19:56:54 - Malaysia Business Forecast Report Q1 2013 - a new country guide report on companiesandmarkets.com

The latest economic data published by Bank Negara Malaysia (BNM), which showed that Malaysia´s trade surplus fell to a new multi-year low in July (the smallest monthly surplus since 2002), have reinforced our view that the economy is in the midst of rebalancing. Overall, we believe that resilient imports and cooling external demand will act as a drag on Malaysia´s headline growth. We expect real GDP growth to remain relatively subdued at 3.8% for 2012 before seeing a mild pickup towards 4.6% for 2013.

We believe that it is a matter of time before BNM submits to mounting pressure to ease monetary policy in an attempt to support economic growth. Concern about economic growth will continue to outweigh those of inflation

 

 

and as external conditions deteriorate. We continue to expect one final 25 basis point rate cut by the central bank to bring its policy rate from 3.00% to 2.75% by the end of 2012.

We see limited room for the government to further expand its spending programmes given its rapidly deteriorating fiscal position in recent years. Prime Minister PM Najib has also reassured investors that a wholesale review of the tax system is in the pipeline. From a long-term perspective, we caution that heavy reliance on petroleumrelated revenues to help fund government expenditures is putting the country´s fiscal position at risk, as we expect Malaysia´s oil output to face a steady decline over the next decade.

Major Forecast Changes

We have revised down our forecast for headline consumer price inflation and now expect it to average a benign 1.7% in 2012, compared with a previous forecast of 2.5%.

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