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Malaysia Country Risk Report Q2 2018

Malaysia Country Risk Report Q2 2018

Executive Summary

Core Views

Malaysia's real GDP expanded by 6.2% year-on-year (y-o-y) in Q317 versus the 5.8% y-o-y recorded in Q217. The government's leading indicators suggest that economic momentum is picking up, and we expect the business environment to remain positive amid ongoing efforts by the government to improve the bureaucracy. A strong public infrastructure investment drive will lend additional support.

We have upgraded our real GDP forecast for 2017 and 2018 to 5.9% and 5.5% respectively, from 5.3% and 5.0% previously.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Election Risks Unlikely To Weigh On Positive Growth Outlook
Malaysia's real GDP expanded by 6.2% y-o-y in Q317 versus the 5.8% y-o-y recorded in Q217. The government's leading indicator
suggests that economic momentum remains strong, and we expect the business environment to remain positive amid ongoing efforts
by the government to improve the bureaucracy. A strong public infrastructure investment drive will lend additional support. We have
upgraded our real GDP forecast for 2017 and 2018 to 5.9% and 5.5% respectively, from 5.3% and 5.0% previously.
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: MAIN IMPORTS & EXPORTS
TABLE: MAIN IMPORT & EXPORT PARTNERS
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
TABLE: CURRENT ACCOUNT BALANCE FORECASTS
Monetary Policy
BNM To Hike Rates By 25bps In 2018
BNM's decision to keep the OPR on hold at 3.00% during its monetary policy meeting on November 9 was in line with our expectations
and we expect the central bank to hike interest rates by 25bps to 3.25% in 2018 on the back of an improving economic outlook and to
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Budget 2018: Fiscal Discipline Still Intact Despite Upcoming Elections
consolidation while preparing the ground for general elections that must be held by August 2018. We believe that strong economic
growth will help the government achieve its goals, while the targeted nature of spending will ensure that expenditure remains capped
TABLE: KEY INITIATIVES AND THEIR MAIN BENEFICIARIES
Structural Fiscal Position
TABLE: MAIN EXPENDITURE & REVENUE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
MYR: Continued Strength Ahead
The Malaysian ringgit continues to look technically bullish following the sustained break of resistance in December 2017. We hold a
positive outlook on the currency and are upgrading our end-2018 forecast to MYR3.90/USD from MYR4.00/USD previously. We expect
undervalued real effective exchange rate TABLE: BMI CURRENCY FORECAST
Chapter 2: 10-Year Forecast
The Malaysian Economy To 2027
Productivity Gains To Support 4.0% Real Growth
Owing to strong demographic trends, a continually improving business environment and further ASEAN economic integration, we see
growth in the working age population, while labour productivity growth is set to rise. The lofty level of household debt and uncertainty
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 3: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
General Elections To Dominate Political Landscape In 2018
Malaysia's political scene in 2018 is likely to be dominated by the run up to and aftermath of the general elections that must be held by
likely to be characterised by considerable politicking. As such, we expect to see an increase in racial and religious rhetoric, which could
result in a slight rise in political uncertainty, informing our Short-Term Political Risk score of 75.6 TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Race Relations Still Cloud The Horizon
Chapter 4 Operational Risk
Operational Risk
TABLE: OPERATIONAL RISK
TABLE: MAIN ACTIVE TERRORIST GROUPS
TABLE: POLITICAL VIOLENCE RISKS
TABLE: MAJOR CONFLICT FLASHPOINTS
TABLE: BUSINESS RESPONSE TO CONFLICT RISKS
Transport Network
TABLE: ROAD RISKS
TABLE: RAIL RISKS
TABLE: PORTS AND INLAND WATERWAY RISKS
TABLE: AIR TRANSPORT RISKS
Chapter 5: BMI Global Macro Outlook
EM Growth To Accelerate In 2018 While DMs Plateau
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES ’ REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS ’ REAL GDP GROWTH, % y-o-y

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