GDP growth, private investment on track for 2015
KUALA LUMPUR, 21 SEPTEMBER 2015 - Backed by strong fundamentals, the Government is confident of weathering global volatilities currently impacting the Malaysian economy.
At the Economic Update 2015 earlier today, top Government officials and economic experts were confident but equally realistic in their assurances that the Malaysian economy is not in crisis; instead it is facing uncertainties as a result of external and internal challenges.
“We acknowledge factors affecting sentiments and realistically, we are gunning down for some tough times. Regardless, we also see long-term, credible investors continue to place their trust in Malaysia as a competitive market committed to sustainable economic growth. We are not in any way, the Malaysia of 1998 during the Asian Financial Crisis,” said PEMANDU CEO, Dato’ Sri Idris Jala.
“Sound fundamentals as a result of fiscal consolidation and public finance reforms put into motion five years ago, augurs well today. We are in a stronger position to defend against the US dollar, falling global crude oil and commodity prices and shifting economic priorities in other major economies.
“We are cognisant of domestic issues and concerns around 1MDB and political funding that has led to some political risk affecting the business environment.
“But as a nation, we are a resilient lot. We will get past this as the administration is committed to its efforts in positioning Malaysia as one of the top investment and trade destinations in Asia,” he added.
Key economic indicators continue to underline the country’s solid fundamentals. For first half 2015, GDP was at 5.3 percent and projected to grow between 4.5 and 5.5 percent for the full year.
Realised private investment accelerated 2.5 times post-ETP with CAGR between 2011 and 2014 at 13.6 percent compared to 5.5 percent between 2006 and 2010. Private investment stood at RM108.5 billion, contributing to 71 percent of total investment in the first half 2015.
Government tax base has increased, providing greater fiscal resilience. The CAGR of government tax revenue is expected to clock in at 11.9 percent between 2011 and 2015, compared to 6.3 percent between 2006 and 2010. For 2015, total tax revenue is estimated RM183.4 billion.
With fiscal deficit narrowing down to 3.4 percent of the GDP (2014) compared to 6.4 percent (2009), and the country’s debt to GDP ratio at 53.7 percent (end June 2015) Malaysia remains in the fiscal safe zone.
Commenting on the decline of the ringgit against the USD at 16.7 percent between 1 January and 18 September this year, Idris pointed out that the plight of the ringgit is not isolated as the USD has appreciated relative to other currencies as well. The New Zealand dollar, Indonesian rupiah, Australian dollar and Russian rouble have depreciated by 17.9 percent, 13.8 percent, 12.1 percent and 8.7 percent respectively, amongst others.
“We don’t like the depreciation but we belong to the global economy, and are exposed to its vagaries. However, we have reduced the government’s reliance on oil significantly since 2010, with the reduction from 35.4 percent of revenue in 2010 to 29.7 percent, as estimated by EPU, in 2014. Had we not done so, we would be harder hit today.”
At the Economic Update 2015 event organised by the Economic Transformation Programme, Minister of International Trade and Industry, Dato’ Sri Mustapa Mohamed, Minister in the Prime Minister’s Department in-charge of the Economic Planning Unit, Dato’ Sri Abdul Wahid Omar, the Governor of Bank Negara, Tan Sri Dr Zeti Akhtar Aziz and Jala also discussed the state of the Malaysian economy and investments. Over 500 representatives from the business and financial community were in attendance.
Subsequently, a panel discussion comprising James McCormack, Managing Director/ Global Head of Sovereign and Supranational Group, Fitch Ratings; Christian de Guzman, Vice President/Senior Analyst, Sovereign Risk Group, Moody’s Investors Services; Phua Yee Farn, Associate Director, Sovereign and International Public Finance Ratings, Standard & Poor’s Rating Services; and Dr Yeah Kim Leng, Dean of School of Business, Malaysia University of Science and Technology, provided their views on Malaysia’s economic outlook.
In July this year, Fitch maintained Malaysia's long-term foreign currency issuer default rating (IDR) at A- and local currency at A, with the outlook revised to stable from negative previously and Standard and Poor’s Rating Services affirmed an A- rating with a stable outlook. Moody’s in January affirmed Malaysia’s A3 rating with a positive outlook.