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Malaysian economy on stronger footing in 2H: UOB

By Tuesday June 7th, 2016 No Comments

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UOB Bank economist Julia Goh says Malaysian economy will likely recover at a gradual pace in the second half of the year. Pix by Muhd Asyraf Sawal

UOB Bank economist Julia Goh says Malaysian economy will likely recover at a gradual pace in the second half of the year. Pix by Muhd Asyraf Sawal

KUALA LUMPUR: The Malaysian economy will likely recover at a gradual pace in the second half of the year, underpinned by the effects of mega infrastructure capital spending and the government’s growth stabilisation measures.

UOB Bank economist Julia Goh has projected the gross domestic product to grow by 4.4 per cent in the second half of the year from an average four per cent in the first half of the year, bringing in the average growth at 4.2 per cent.

The government has also in place several stablisation measures which could boost the nominal GDP by at least one per cent, she added.

She was referring to the three per cent cut in the Employees Provident Fund (EPF) contribution rate, a special RM2,000 tax relief for middle-income tax payers, an increase in minimum wages and civil servant wages, visa waiver for China tourists, as well as a one per cent corporate tax cut.

On the ringgit, Goh expects the currency to show some volatility amid expectations for a US Federal Reserve rate hike in the coming months.

“Nonetheless, the ringgit is still the second best performing currency in the Asian region after the Japanese Yen.

“Our outlook for the ringgit remains positive driven by recovering oil prices, the country’s sustained current account surplus and intact fiscal deficit targets.”

Elaborating on the economy, Goh said it remains well diversified with the services sector contributing 54 per cent, manufacturing 23 per cent, construction 4.4 per cent, mining and quarrying 8.9 per cent and agriculture 8.8 per cent of total GDP.

Over 16 per cent of Malaysia’s exports are in commodity sectors while 80 per cent are in manufactured products.

“While manufacturing exports are largely concentrated in the electrical and electronics (E&E) segment, many E&E firms both multinational corporations and domestic enterprises have diversified from manufacturing traditional personal computers and parts into higher value-added segments,” she said.

One example is moving into cloud computing and increased involvement in the enterprise servers segments. Another significant development is Malaysia’s increasing involvement in the automotive and semiconductors industries.

“The ongoing E&E diversification puts Malaysia in a good position to capitalise on demand from advanced economies,” Goh said.

Greater economic diversification has also reduced Malaysia’s dependence on oil revenue with share of oil revenue projected to fall to 14.1 per cent in 2016 compared to 35.8 and 41.3 per cent in 2011 and 2009, respectively.
Source: NST

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