Malaysia Business Forecast Report Q2 2010 : Market Research Report

Malaysia Business Forecast Report Q2 2010

Published by: Business Monitor International

Published: Feb. 5, 2010 - 74 Pages

Executive Summary: V-Shaped Recovery Ahead
Chapter 1: Political Outlook: Domestic Politics 1; BN’s Grip To Be Continually Tested; We expect the rule of the incumbent Barisan Nasional (BN) to be subject to mounting challenges by the opposition; Pakatan Rakyat (PR) going forward, meaning that political scene is likely to be vibrant come 2010.
Table: Malaysia Political Overv iew: Domestic Politics 2; PR’s Common Policy Framework Encouraging; The opposition Pakatan Rakyat (PR) can expect more electoral support thanks to the unveiling of the Common Policy; Framework (CPF), although its ideological disparities will continue to be a stumbling block.; Long-Term Political Outlook; Race Relations Still Cloud The Horizon; Malaysia’s ethnic diversity will continue to influence domestic politics, while the rise of a stronger opposition since the; March 2008 elections opens up a myriad of possibilities in the political arena over the longer term.
Chapter 2: Economic Outlook: Economic Activity; V-Shaped Recovery Under Way; We have bumped up our growth real GDP forecasts for Malaysia, expecting the economy to decline by 2.1% in 2009; (from an earlier forecast of -3.4%), before rebounding strongly by 4.3% in 2010 (from 2.7% previously).
TABLE: ECONOMIC ACTIVITY: Monetary Policy; Rate Rise Expected In H210; We expect the Malaysian central bank to raise interest rates by 50 basis points (bps) by the end of 2010 to 2.50%, from; 2.00% currently.
table: MONETARY POLICY: Regional Trade Outlook; Integration With China To Boost Trade; Chinese President Hu Jintao’s visit on November 11 underscores the rising importance of bilateral trade and investment ties.; Property Sector Outlook; Property Sector: Bubble-Free Recovery Expected; While we expect the Malaysian property sector to stage a firm recovery, asset prices are likely to be inhibited by an oversupply.
Chapter 3: 10-Year Forecast: The Malaysian Economy To 2019; Growth Path Maintained; Our forecast sees Malaysia enjoying a respectable average growth rate of 5.3% over the 2010-2019 period, thanks to its; favourable demographics and a rising middle-income class boosting private consumption.
TABLE: Long -Term Macroeconom ic Forecasts
Chapter 4: Special Report: Political Risk In The Next Decade; What To Expect In 2010-2019
Table: Countries Facing Major Leadership Succession In 2010-2019
Table: Countries At Risk Of Major Political Upheaval
Table: Countries At Risk Of Interstate Conflict Or Heightened Bilateral Tension
Table: Countr ies Facing Sece ssion ist Or Autonom y Movement s, In surgenc ies, Or Civil Wars
Table: Pivot al St ates
Chapter 5: Business Environment: Business Environment Outlook
Table: BMI’s Asia Pacific Business And Operational Risk Ratings: Institutions
Table: BMI’s Asia Pacific Legal Framework Ratings: Infrastructure; Market Orientation
TABLE: ASIA, ANNUAL FDI INFLOWS
Table: BMI’s Asia Pacific Trage Ratings
Table: Top Export Destinations (US$mn): Operational Risk
Chapter 6: Key Sectors: Food and Drink
Table: Food Consumption Indicators — Historical Data & Forecasts: Telecommunications
Table: Telecoms Sector — Internet — Historical Data & Forecasts
Chapter 7: BMI Global Assumptions: Global Outlook; 2010 Looking Rosier
TABLE: GLOBAL AND REGIONAL REAL GDP GROWTH
TABLE: developed market exchange rates
Table: Emerg ing Market Exchange Rates
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES
TABLE: EMERGING MARKETS

Abstract

The Malaysian economy performed respectably in Q309, registering real GDP growth of -1.2% yo-y, as compared to the -3.9% decline in the preceding quarter. In view of the better-than-expectedgrowth, we now forecast a V-shaped economic recovery of 4.3% in 2010, from an estimated declineof 2.1% in 2009. Importantly, we foresee that the domestic economy will take on an increasinglyimportant role next year, compensating for weaker export growth due to sluggish global trade.

Meanwhile, the incumbent Barisan Nasional (BN) coalition is also facing increased challenges atboth the federal and state levels - as seen in the near-defeat of the government’s Budget 2010bill and Kelantan’s oil royalty dispute in 2009 - pointing towards a testing political scene this year.

T he opposition Pakatan Rakyat (PR) unveiled its Common Policy Framework (CPF) on December19 2009, integrating member parties’ electoral goals by emphasising social equality and povertyeradication. While we believe that the opposition’s latest move will boost voter support in thenear-term, we foresee that the CPF’s longer-term efficacy will be constrained by the disparateideological views held by member parties. Indeed, the idea of turning Malaysia into a fully-fledgedIslamic state - a point of contention between the Islamic Party of Malaysia (PAS) and the secularDemocratic Action Party (DAP), both PR members - may serve as a stumbling block for the opposition.We believe that Bank Negara Malaysia will raise the benchmark overnight policy rate (OPR) by50 basis points (bps) to 2.50% (from 2.00%) in H210 in an effort to preempt a projected rise ininflation rates. Indeed, BMI is predicting that the consumer price index (CPI) will return into inflationaryterritory to register an increase of 3.5% y-o-y by December 2010. In contrast, the headlineCPI increase was just -0.1% y-o-y in December 2009. However, we do not expect the country toexperience significant property price increases due to ample supply, which should help ensure asmoother economic recovery.

Malaysia scores 61.5 in our Business Environment Ratings, placing it at an above-average 36th(from 145 ranked markets) in the world and 8th in Asia. However, the country still lags when comparedto regional standard bearers like Hong Kong and Singapore, which are ranked 2nd and 1stin the world respectively. This is largely due to Malaysia’s weaker scores in our Institutions andMarket Orientation sub-index. Meanwhile, the newly launched East Coast Economic Region SpecialEconomic Zone may provide more impetus for foreign players to invest in Malaysia. However,underlying issues including corruption and cumbersome bureaucracy need to be addressed.

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Malaysia Business Forecast Report Q2 2010

Table of Contents

Abstract