The country’s gross domestic product (GDP) is expected to expand by 4 percent to 5 percent this year, down from the 5 percent growth seen in 2015, according to a survey conducted by Moody’s Investors Service.
“The results are in line with our view that Malaysia’s headline real GDP growth rate will slow [down] to 4.4 percent in 2016, although there are downside risks to this view,” said Rahul Ghosh, a Vice President and Senior Research Analyst at the ratings agency.
“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 said.
Domestic private consumption is also expected to be constrained by the country’s high household debt, which hit 89.1 percent of GDP last year.
In addition, Moody’s projected that local banks are facing rising credit risks in 2016, amidst the slower economic growth along with the weaker corporate and household balance sheets.
Nevertheless, most of the respondents in study believe that the Malaysian ringgit has improved significantly, forecasting that currency would stabilise against the US dollar in the next 12 months.
However, 53 percent of those polled anticipate that the exchange rate may rise to RM4 to RM4.20 per greenback over the said period, while around 33 percent expect it to drop to RM3.50 or edge up to RM4.00 per US dollar.
As of noon today (12 April), a greenback is equivalent to RM3.89.
Nonetheless, the local currency is now being supported by an improvement in Malaysia’s trade surplus and foreign exchange reserve. It is also being helped by the recent let-up in the appreciation of the US dollar.
“Even if the ringgit were to remain weak, or embark on a renewed depreciatory trend, the overall exposure of Malaysia’s sovereign and banks to foreign exchange risks would remain manageable,” added Moody’s.
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
