BUSINESS

RAM EXPECTS DOMESTIC DEMAND DRIVERS TO LEAD 4.5 PCT PROJECTED GROWTH IN 2020

15/11/2019 06:32 PM

KUALA LUMPUR, Nov 15 -- Malaysia’s economic growth is forecast to ease slightly to 4.5 per cent in 2020 from the 4.6 per cent expected this year, said RAM Ratings today.  

It said the country’s economic resilience will rely heavily on domestic drivers in 2020 against the backdrop of a continually challenging external demand landscape.

The current ebbing of global growth momentum shows little sign of being arrested anytime soon as forward-looking external cyclical indicators remained weak and the world economy still faced the risks of rising trade protectionism as well as uncertain trade policy direction. 

The rating agency added that more emphasis on domestic demand-driven expansion, both monetary and fiscal policies will play an integral role as a buffer against downside risks, given the baseline expectation of lingering weakness in external growth.

In light of the mildly growth-supportive Budget 2020, RAM Ratings said there was also a possibility of Bank Negara Malaysia cutting the overnight policy rate another 25 basis points to 2.75 per cent next year.

“Our expectation of further easing is premised on the potential risk of external downside risks filtering through to the domestic growth drivers of consumption and investment - the backbone of sustainable growth in 2020,” it said in a statement today.

Meanwhile, the anticipated resilience of domestic-oriented sectors should contribute positively to the healthy 6.8 per cent growth of private consumption next year, compared to the projected 7.3 per cent for 2019.

Private investment is forecast to expand 3.6 per cent next year, from the projected 1.2 per cent for 2019. 

“From our analysis of RAM Business Confidence Index (RAM BCI) data, domestic-oriented firms have been recording very stable readings in the last few quarters.

“Over the last several years, the construction and services sectors, which are the most domestic-oriented, have been exhibiting high ratios of employee compensation to value-added output, as well as a lower variability in wage growth compared to those in the manufacturing sector,” said RAM Ratings. 

-- BERNAMA 

 

 

 

 

 


 


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