Malaysia’s economic outlook is stabilizing: S&P

After slashing Malaysia’s GDP growth forecast for 2021 to 3.2% (from an earlier 4.1% projection), S&P Global now anticipates the nation is entering a period of economic stability.

“The outlook is stabilizing now because vaccination rates are improving and there is a path to reopening the economy in place,” said S&P’s Asia-Pacific economist, Vishrut Rana, in a briefing today.

“Asia Pacific trade has been significantly strong, in particular the level of exports and imports is much higher than pre-COVID levels, in particular exports have been performing very strongly over the past several months.

“Part of the driver has been very strong global demand for durable goods. Malaysia, as an open economy, benefited significantly from this trend.

“In addition, Malaysia is also a key part of the electronics supply chain in the Asia Pacific which is another factor that has been holding up manufacturing and trade in the country.”

Mr Rana said trade levels will now likely plateau over the coming months.

“We don’t expect a significant slowdown, which means that trade will continue to support growth. On the other hand we do not expect an acceleration of activity from here, because we anticipate that the durable goods demand is going to weaken globally as consumers move to services.”

S&P expects Malaysia’s monetary policy settings to remain accommodative for the foreseeable future, with the Bank Negara Malaysia unlikely to respond to any external monetary policy tightening.

Following 3.2% GDP growth this year, S&P is projecting 6% growth in 2022.

Malaysia’s GDP fell -5.6 per in 2020. It was the largest contraction since the Asian Crisis, when the nation’s GDP contracted -7.4% in 1998.