Malaysian Growth Will Slow In 2016

A new poll conducted by Moody’s Investor’s Service (MIS) reveals that real GDP in Malaysia is expected to slow in 2016. Conducted in Kuala Lumpur, the nation’s capital, results reveal that more than half (58 percent) of those surveyed believe growth in the country will begin to stall this year.

“The results are in line with our view that Malaysia’s headline real GDP growth rate will slow to 4.4 percent in 2016, although there are downside risks to this view,” Rahul Ghosh, a Moody’s vice president and senior research analyst said in a published note. “Given the open nature of its economy— with exports and imports combined accounting for 131 percent of GDP—, Malaysia is susceptible to a prolonged period of subdued global demand and weaker commodity prices, which will result in slower investment demand, and downward pressure on exports and government receipts,” he adds.

Malaysia’s high household debt burden— is another issue that swayed those surveyed. It currently registers at the equivalent to 89.1 percent of GDP in 2015. This, Ghosh explains, will constrain the ability of private consumption to support domestic demand.

Kota Kinabalu, Malaysia--Local people selling BBQ chicken in Kota Kinabalu night market by the seafront in Sabah Borneo Malaysia.
Kota Kinabalu, Malaysia–Local people selling BBQ chicken in Kota Kinabalu night market by the seafront in Sabah Borneo, Malaysia

In the report entitled “Malaysia–Inside ASEAN: The View from Malaysia”, real-time poll numbers are shown. The report discusses results from polling conducted during the agency’s Inside ASEAN–Spotlight on Malaysia briefing in Kuala Lumpur, which was held on March 23.

As for the ringgit, Malaysia’s official currency, the broad view among market participants at the event was that the currency has improved significantly, and that the ringgit will “show stability against the US dollar over the next 12 months.”

Moody’s, in a note published on April 11, the agency explains that the recent pause in dollar appreciation, coupled with an improvement in Malaysia’s trade surplus and foreign exchange reserve position, provide a reasonably supportive backdrop for the ringgit. And, should the currency remain weak or being to slide, the overall exposure of Malaysia’s sovereign and banks to foreign exchange risks would remain manageable.

The agency also points out that “the predominance of funding” in the local currency shows that weakness in the ringgit has not led to increased debt distress in Malaysia’s corporate and banking sectors. In addition, the “knock-on” impact on interest rates has remained muted.

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