World Economy

Malaysia Growth Momentum Picks Up

Malaysia Growth Momentum Picks Up
Malaysia Growth Momentum Picks Up

Business optimism among Malaysian companies is hitting new peaks in the first quarter of 2018 as growth momentum continues to pick up.

According to Dun & Bradstreet Malaysia’s Business Optimism Index study, overall BOI jumped from 5.52 percentage points in Q4 2017 to 7.25 percentage points in Q1 2018, reported.

On a year-on-year basis, BOI rose from 1.65 percentage points in Q4 2017 to 7.25 percentage points in Q1 2018. For Q1, four of six indicators had risen upwards on a quarter-on-quarter basis.

On a year-on-year basis, five of six indicators had improved. Both services and transportation sectors are most optimistic with all six indicators in positive territory. The construction sector is least optimistic with only two indicators in the expansionary zone for Q1.

Compared to 2017, firms are more optimistic about investments in business expansion this year. There is a visible increase in firms expecting investments to increase from 8% in 2017 to 18% in 2018.

Meanwhile, the proportion of firms expecting investments to decrease fell from 21% in 2017 to 15% this year. Majority of local firms had anticipated investments to remain unchanged at 67%.

Firms have identified machinery and equipment to be the most important area of investment for 2018 at 40%, followed by investments in information technology at 28%, and skills upgrading of employees at 12%.

Global economic uncertainties have been highlighted as the main challenge in 2018 facing Malaysian firms, accounting for 31% of firms being surveyed.

Higher business costs accounted for the second major challenge at 27% and increased competition was the third main challenge at 25%.

Meanwhile, AmBank Research said export of electricals and electronics had continued to expand strongly by 21% yoy in November from 16.9% yoy in October.

“E&E segment is envisaged to perform robustly, benefitting from the cyclical growth underpinned by a healthy external demand.”

Exports were also being supported by chemical & chemical products (+20.2% yoy), and manufacture of metals (20.8% yoy) while petroleum products grew 1.2% yoy. Total export volume grew strongly by 9.7% yoy in November.

On the ringgit performance this year, AmBank Research said the local note is projected at 4.00 to 4.02 against US dollar for the full-year average.

“We expect the US dollar/ringgit to remain on a strong note with our end-period projection at 3.95 which is our base case and best case is at 3.76,” it added.

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