Downside risks, lowered GDP growth numbers

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A friend asked if lower GDP growth number is going to be bad for the property market. I think to everyone who does not understand the property market, everything will be bad for the property market, right? Stock market is down, bad for the property market. LRT station cancellations, bad for the property market. Some politicians arguing and became big news, bad for the property market. Haha. Malls failing, bad for the property market. ONE MNC out of hundreds retrenching some of its staffs, bad for the property market. 😛 Only read on if we are objective enough, else please skip because the announcement from Bank Negara Malaysia is considered a downgrade from its earlier projections.

Article in thesundaily.my here. BNM says that external environment is affecting Malaysia’s GDP growth. It has thus revised its GDP growth projections downwards from 4.9 percent to 4.3 – 4.8 percent for 2019. The world is actually growing slower too. Nevertheless the main ‘engine’ remains to be domestic demand (so, please continue buying yeah). Private consumption growth is expected to be 6.5 percent with private investment expected to be stronger at 4.9 percent. (both are still growing yeah!) Our BNM governor Nor Shamsiah believes the global economy will not fall into a recession. (super important belief) Account balance will still be in surplus, though narrowing to 1.5% of gross national income versus 2.5% previously.

This is her comment about deflation. “We’re not suffering from deflationary pressure. Deflation occurs when price declines are broad based. More than 50% of goods in the CPI basket are experiencing increase in prices. The decline in headline inflation is solely due to transport cost and high base effect.” This is her comment about Finance Minister Lim Guan Eng’s call for banks to be more flexible in lending. She does not think the bank will tighten their lending because the loan disbursement grew 7.3% in 2018 versus 5% in 2017. Even more importantly, about the external debt. She said, “Under the baseline projection, external debt will decline to 56% of GDP by 2023 facilitated by continued account surplus and economic growth, faced against the adverse shocks of external debt that will rise above the baseline projection but remain manageable due to Malaysia’s debt profile and external buffers.” Article in thesundaily.my here.

A few key things we must note is that GDP is still growing even if it’s slightly lower than previously projected. Deflation is NOT necessarily better than inflation but it is manageable. Earlier article here. The banks are STILL lending even if many said their applications were rejected. It’s good to also buy prudently instead of over-stretching… External debt is 56 percent, so it’s definitely not the ‘trillion’ figure being mentioned which many of my friends are now repeating. Based on international accepted convention in calculation of external debts, our debts are definitely below 1 trillion. Else, our sovereign rating would have dropped to non-investment grade already. By the way, bad news would be a good news for people who’s ready wish cash… 🙂 Happy following.

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written on 28 March 2019

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