IMF to Malaysia: Growing yes but WATCH OUT

The International Monetary Fund (IMF) had just said some good things, some warnings and even additional information about the state of the economy in Malaysia. You can read the full here or the brief below. (With comments by someone without an economic degree, that’s me.)

Watch out! Two major issues for Malaysia is the country’s high public sector and household debt levels. This will be a concern should the global financial stress spills over to our economy.  Of course, it also said that the debt ratio to GDP will decline (good news) but the percentage remain high.  (I think this is the best watch out message for Malaysia.  In brief, as long as the world does not fall into an unforeseen crisis, we should coast along. Malaysia is on the improving track in terms of debt to GDP percentage) Read a bit more here: GDP growth, deficits and A-ratings as per Fitch ratings

Good news.:)  Malaysia’s economy can be considered resilient as it was able to adjust to lower global oil prices. Malaysia has a diversified economy along with exchange rate flexibility. This has buffered the real economy from the commodity price shock, while deep financial markets have helped absorb global financial market volatility. Especially for BNM, IMF said this, “Risks of a severe downturn in the financial cycle appear to be low, mainly due to a resilient banking system and Bank Negara Malaysia (BNM)’s prudent policies and oversight.” ( What a great endorsement right. Commodity prices falling like crazy and lower global oil prices… yet we are at this moment still growing. Yes, I have always been proud of our BNM governors.  ) About the ringgit? Read here:  International Reserves, after the Ringgit’s sudden tumble

Conclusion from IMF? Their actual words ok. “Malaysian economy will continue to perform well, despite significant headwinds. Real GDP growth is projected at 4.2 per cent for 2016, underpinned by resilient domestic demand and projected to increase to around 4.5 per cent in 2017. Over the medium term, potential economic growth is expected to be between 4.5 and 5 per cent.”  (I think it’s clear that IMF does not say a lot of good things about Malaysia but I think this clearly show that Malaysia will continue to grow, not just in 2016 but 2017 and beyond. Do google for what IMF said about Malaysia when we introduced capital control in 1998. The only worry would be IF the world spins into a crisis again. Let’s wish it does not…)  Happy following.

written on 15 Dec 2016

Next suggested article:   Household Debt Malaysia vs Assets, as per Allianz Global Wealth Report

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