OCBC Bank Chief Economist Selena Ling presenting the bank's 2020 Economic Outlook here today.
KUALA LUMPUR, Jan 15 -- OCBC Bank expects Malaysia’s gross domestic product (GDP) to grow between 4.2 per cent and 4.4 per cent this year, and the ringgit to improve to RM4.04 against the US dollar by end-2020.
Chief economist Selena Ling said the anticipated GDP growth, which is slower than the 4.8 per cent projected by the government, would be mainly affected by external factors such as the United States (US)-China trade deal and geopolitical developments in the Middle East.
Nevertheless, she said some strong directions from the Asia-Pacific Economic Cooperation (APEC) 2020 meeting on ASEAN’s course towards market liberalisation and regional integration could help the economic growth of the region, including Malaysia.
“That can be a very good catalyst to offset the protectionist kind of inclination that we see in the last two, three years,” she said at the OCBC Bank 2020 Economic Outlook media briefing here, today.
Malaysia is the host of the year-long APEC 2020 meeting.
On the ringgit’s performance, she said it would mainly be supported by foreign holdings in the Malaysian Government Securities (MGS), which is currently at 41.6 per cent - the highest level since mid-2018.
According to Ling, Asia’s treasury yields -- including Malaysia’s 10-year MGS which stand at about 3.3 per cent -- are far more attractive than the US benchmark 10-year treasury which stands at 1.8 per cent.
“This is why we think Asian foreign exchange, including the ringgit, would outperform the greenback, as the US dollar may not continue to see the big strong uptrend that we saw in the past one or two years,” she said.
On Bank Negara Malaysia’s (BNM) monetary policy adjustments, Ling said that there is a good chance that the central bank would lower the benchmark rate by 25 basis point in the first half of the year.
“While inflation may pick up this year due to fuel subsidy rationalisation, there is some room for the central bank to cut rate and retain a dovish bias to give more support to domestic consumption and the exports sector,” she said.
Malaysia’s exports for November 2019 contracted 5.5 per cent year-on-year, and Ling is hopeful that a detente in the trade conflict between the US and China and anticipation of global trade flows pick-up for 2020 could lend support to Malaysia’s exports performance this year.
However, she cautioned that the phase one trade deal signed between the US and China could hurt Asia, including Malaysia’s exports, particularly electrical and electronics products.
“China’s promise to buy US$200 billion of additional goods and services from the US in the phase one trade deal would mean less import from the region,” said Ling.
She also does not expect to see much support from the palm oil sector in overall exports.
While the commodity prices are currently benefiting from the shortage of soybean oil in China in light of poor weather, she foresees some price consolidation going forward as the spread between palm oil prices against gas oil and soybean oils starts to narrow.
Owing to the modest demand for palm oil particularly from China, she expects the commodity price to stabilise to RM2,800 per tonne towards the end of 2020, from the current price of above RM3,000 per tonne.