SERC maintains 4.5%-4.7% GDP growth forecast amid downside risk from trade war

24 Jun 2019 / 14:05 H.

KUALA LUMPUR: Socio-Economic Research Centre (SERC) is maintaining Malaysia’s gross domestic product (GDP) growth forecast of 4.5-4.7% for this year, despite downside risk from the protracted US-China trade war.

“Continued expansion in domestic demand and moderate exports growth would continue to support overall economy,“ said its executive director Lee Heng Guie (pix) during SERC’s quarterly economy tracker report briefing today.

On the country’s export performance, the think tank remains cautious on the outlook as the US-China trade war is expected to escalate to the next level with tariffs of US$300 billion (RM1.25 trillion) expected to be slapped on Chinese goods following the conclusion of US Trade Representative public comment period and hearing on July 2.

While exports figures for May and June are expected to improve partly aided by relatively low exports levels a year ago, Lee foresees the performance of major exports, namely electrical and electronics products, chemicals and chemical products, metal products and palm oil to remain moderate.

“We see downside risk to our current exports growth estimate of 3.3% for this year, compared with 6.8% in 2018. The first four-month exports have declined marginally by 0.2%,” he added.

On the flip side, Malaysia is poised to take advantage of the short term trade diversion opportunities afforded by the conflict.

Lee pointed out that in the past, there was a focus on China due to the size of its market but with the trade war, the attention has shifted to Asean countries and the interest in Malaysia has increased significantly, as reflected in the approved foreign investments from China.

“To take advantage of the trade diversion, we have to act fast to realise the trade diversion potential. What if a company wants to uproot their plant to the country? Malaysia has to be able to more flexible to meet the demands of the trade diversion.”

Lee gave a hypothetical scenario of a company having a shortage of skilled manpower to shift its operations in to the country.

“In such cases, the government has to act fast to address the needs of the foreign investors to bring in the manpower necessary. It has to be able to be more flexible to meet the demand of the trade diversion.”

He lauded Prime Minister Tun Dr Mahathir Mohamad’s suggestion to form a one stop centre for foreign investor inquiries, however he cautioned that it must be staffed by those who are able to make prompt decisions to attract such investments.

email blast