ZCZC
BCN-26
MALAYSIA-ECONOMY-REFORM
Malaysian economy holds up well despite uncertainties
KUALA LUMPUR, July 7, 2018 (BSS/Xinhua) – Although some reforms measures
carried out by Malaysia’s new government led by Prime Minister Mahathir
Mohamad raised uncertainties in the country’s fiscal position, analysts here
are generally positive on the economic outlook in the first half of its 100
days reforms.
The economic reforms included the removal of government service tax (GST)
and re-introduction of fuel subsidy, among others.
“The long term outlook could be looking positive after clearing some
inefficient usage of government’s resources in the past, resulting in better
governance,” said Hong Leong Investment Bank in a report Friday.
The victory by Pakatan Harapan in the 14th general election (GE14) took
the market by surprise last month and triggered some sell-off by foreign
investors in Malaysia’s equities and bonds.
The country’s national debt, which is said to have spiked to 1 trillion
ringgit (247.6 billion U.S. dollars), negative news flow on the 1MDB scandal,
slowdown in construction sector after the new government review construction
of mega projects and lower revenue following GST “zeroization” have weighed
on the market sentiment.
While abolishing the GST has led to a revenue loss of 21 billion ringgit,
the Malaysian government has also announced series of expenditure
rationalization exercise which is projected to save 10 billion ringgit.
“We are of the view that the government is on the right path in addressing
the country’s financial position and economic well being, rather than by
merely being a change in administration. We believe that legal and regulatory
reforms will be addressed, and thus setting Malaysia on a right footing once
again,” Affin Hwang Capital Research said in its recent report.
“On the whole, we nevertheless remain mid to longer term positive and
believe that the on-going reforms coupled with a more-transparent government
with the right policies will steer the country in the right direction,” it
said.
It is also confident that the country’s economic growth could receive a
boost longer term while the positive changes could overall lead to an
improvement in the investment climate.
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ZCZC
BCN-27
MALAYSIA-ECONOMY-REFORM 2 LAST KUALA LUMPUR
“What we have seen from the new government is a push towards greater
transparency and accountability, with the unravelling of the excesses of the
previous administration,” said KAF Investment Bank in its recent report.
To the foreign research house, Malaysia’s new government has been moving
fast to address the market concerns by embracing greater fiscal discipline
and tighter controls over government spending.
In addition to the public expenditure cut, the new government expects the
reintroduction of sales and services tax (SST) in September to bring in
revenue of 4 billion ringgit. It also expects higher dividends from
government linked companies of 5 billion ringgit, and extra income of 5.4
billion ringgit due to higher oil price.
“Malaysia’s near-term growth and economic fundamentals remain sound – and
provide a solid foundation for the government to move forward with its
agenda. Economic growth is expected to remain strong at a rate of 5.4 percent
in 2018,” Mara Warwick, the World Bank’s country director for Malaysia,
Philippines and Thailand said recently.
As a highly open trade-oriented economy at the center of the world’s
fastest growing region, Malaysia continues to benefit from robust global
demand for its exports, she said.
Last week, S&P Global Ratings has reaffirmed Malaysia’s “A-/A-2” foreign
currency and “A/A-1” local currency ratings, with stable outlook.
“We expect that Malaysia’s core credit strengths, including its robust
external position and highly credible monetary policy settings, will continue
to support the rating following the recent change in government,” it said.
“The stable outlook balances Malaysia’s strong net external position,
above-average growth performance, and track record of monetary flexibility
against the risks inherent in the ongoing political transition and its
sizable government debt stock,” it said. (1 U.S. dollar equals to 4.04
Malaysian ringgit)
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