KUALA LUMPUR, Nov 19 — Fitch Solutions Macro Research (FMSR), a unit of the Fitch Group, has lowered its GDP projection for Malaysia for 2018 from 5.1 per cent previously to 4.6 per cent.
The 2018 revision reflects the weaker than expected Q3FY18 results and its expectations for growth to decelerate further in Q4FY18. Malaysia recorded a GDP growth of 4.4 per cent for the third quarter of 2018.
“We expect all components of the GDP except for private consumption to face headwinds in 2019 due to large, one-time repayment of tax refunds,” said FMSR in a statement.
For 2019, the research outfit has projected a GDP growth of 4.2 per cent, which was lower than its initial target of 4.5 per cent.
It also said that it was not expecting the central bank to hike interest rates by 25 basis points to 3.5 per cent due to the weaker economy in 2019.
The revision to the 2019 figure reflects its concerns about exports and investment growth for next year. FMSR said that Malaysia’s 2019 external outlook to be negatively affected by the combination of a slowing semiconductors cycle and a likely escalation of the US-China trade dispute amid still-low palm oil prices, which should weigh on the country’s trade balance.
In addition, investment, particularly foreign investment, is likely to remain subdued due to continued policy uncertainty.
FMSR said although the government has publicly said that it welcomes foreign investment, there is a contradictory signal in the spate of project cancellations and the unfavourable rhetoric toward foreign ownership.
Prime Minister Tun Dr Mahathir Mohamad has said that foreign investment projects must employ Malaysians and satisfy their financing needs with loans from Malaysian banks. There have so far been no details with regard to the quota for these two criteria, which nonetheless constitutes restrictions that would discourage foreign investors.