PETALING JAYA: The economy is slowing but a recession is not on the horizon, Deputy International Trade and Industry (Miti) Minister, Ong Kian Ming (pix) said today.
He said there have been an increase in the number of opinion pieces and articles prognosticating a gloomy future for the Malaysian economy in 2019.
“While there are certainly economic challenges ahead driven by internal and external factors, the perception that the Malaysian economy will somehow crash and burn in 2019 is most certainly a false one,” Ong said in a statement.
“Firstly, let’s look at the Nikkei Malaysia Manufacturing Purchasing Manager’s Index (PMI) which dropped to a low of 46.8 in December 2018. The PMI data is an important leading indicator of economic activity in the manufacturing sector.
“A figure above 50 shows that managers are increasing their orders and economic output whereas a figure below 50 shows that managers are depleting their existing stocks and not expecting to increase their future economic activity.”
The PMI fell for four consecutive months from January to May 2018. But the fall in the PMI in the first half of 2018 did not lead to any significant decreases in manufacturing output and value in the Malaysia economy, he said.
“The overall trend in the value of manufacturing sales in Malaysia showed a healthy increase from RM67.8 billion in January 2018 to RM73.1 billion in October 2018, which is an increase of 7.8%.”
“The manufacturing sales for each month in 2018 exceeded the sales for the same month in 2017. There was no significant slowdown in manufacturing sales in 2018 despite the drop in the PMI for four consecutive months from January to May 2018.”
Ong said employment continued to grow steadily from 14.67 million in January 2018 to 14.94 million in October 2018 (an increase of 1.8%). Unemployment remained steady at 3.3% during this time period.
Total trade figures also continue to show an increasing trend in 2018 compared with 2017, he said. The total trade for each month in 2018 was higher than the corresponding month in 2017 (with the exception of February 2018). Exports for each month in 2018 was similarly higher than the corresponding month in 2017 (with the exception of August 2018).
Total Trade (Jan to Nov 2018) has increased to RM1.72 trillion from RM1.62 trillion over the same time period in 2017, an increase of 6.2% (which is higher than the initial target of 5.0% growth set in early 2018).
Total Exports (Jan to Nov 2018) has increased to RM914 billion from RM855 billion over the same time period in 2017, an increase of 6.9%.
Total Balance of Trade Surplus (Jan to Nov 2018) has increased to RM109.6 billion compared to RM91.1 billion during the same time period in 2017, an increase of 20.2%.
“The challenge with depending too much on the Manufacturing PMI is that it is a business survey and the correlation with actual output may be weak,” he said.
“One could easily point to other business surveys which shows a more positive outlook for 2019. According to the Business Tendency Survey results for Q4 2018, most establishments expect that business performance from October 2018 until March 2019 will be better compared to the period from April to September 2018 (with the exception of the construction sector).”
The figures do not mean that we can be assured of continuous growth in 2019, especially in the manufacturing sector, he said.
“A slowdown in manufacturing growth may be imminent but the degree of the slowdown should be manageable, especially with the RM37 indirect stimulus via the GST and Income Tax refunds which should boost domestic consumption and investment.
Most importantly, the figures do not show that Malaysia is heading towards a contraction in economic output anytime soon, he added.
