2016 has been a bad year? Mixed year? Or for the over 70 percent professionals who are expecting bonusses, perhaps not too bad at all? Read here: Malaysian professionals: 77% expects a bonus, 74 percent awaits pay rise Thus far the expectation from the International Monetary Fund (IMF) is that Malaysia will grow by 4.2 percent for 2016. Credit Suisse expects a 4.1 percent growth for 2016. What about 2017? This is what Credit Suisse says in an article in NST.
Growth in 2017 is likely to be slightly higher than 2016 due to public infrastructure projects and improving commodity prices. They include the Mass Rapid Transit Line 2 (RM27 billion), Light Rail Transit Line 3 (RM9 billion), and the Pan-Borneo Highway (RM29 billion). These are infrastructure projects that will fuel the economy.
Current account surplus should also improve. It will rise to 2.3 percent of gross domestic product (GDP) versus 1.9 percent of GDP in 2016.
Government’s oil price assumption is US$48 and this is considered conservative. Revenue will rise with higher oil prices. With higher revenues, government has more ability to spend.
Ringgit’s volatility will continue and this is a concern. It said Bank Negara Malaysia’s restrictions on non-deliverable forward (NDF) trading may not be seen as positive. It said that the long term effects from this is unclear, where foreign direct investments are concerned. (I do not think it will affect any genuine long term investors because this was not the main reason why BNM sought to increase liquidity within Malaysia instead of some unknown entities out there…)
Consumer price index (CPI) is expected to rise slightly to 2.6 percent.
If ringgit continues to move downwards with the pressure from the dollar, the banking system would face tighter liquidity and there is a risk of bond market collapse as well as pressure on borrowing cost in the debt capital markets. (Suddenly, because of another currency all these are happening. So, I am supposed to believe people saying ringgit is going down because fundamentals are bad? Sigh…)
Okay, that’s why one international bank said about Malaysia. As usual, these are analysed by capable analysts with lots of data. So, I am sure they stand for something. Do look at all the positives and understand also that another key sign would be employment rate. As long as majority of everyone has a job and jobs continue to be created, I think our fundamental is intact. As soon as we see a mass deterioration of the number of jobs available or retrenchments, then the alarm bells should ring. Having a job also meant debts can be paid. Without a job means debt could not be paid and when a lot of people are unable to pay debts, the non-performing loans go up. When non-performing loans go up, banks are reluctant to lend for fear of further deterioration. The cycle continues and we suddenly start to see signs of financial crisis. As of now, no such signs. As for me, I continue to believe better times are not too far away. Alternatively, keep doing things to ensure on a longer term basis, we should be okay. For example? Property investments loh.
written on 20 Dec 2016
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