Malaysia is well-prepared to withstand a potential recession in the United States, according to Malaysia's Finance Minister, Tengku Zafrul. He emphasized that Malaysia's strong economic fundamentals, including a resilient banking system and diversified economy, would help the country weather any external shocks. Tengku Zafrul also highlighted the government's efforts to stimulate economic growth through various initiatives, such as the National Recovery Plan and the Budget 2022. He expressed confidence in Malaysia's ability to navigate through challenging times and emerge stronger.
The Socio-Economic Research Centre (SERC) has also stated that Malaysia is expected to weather a mild US recession due to its diversified exports and robust domestic demand. Historical data suggests that a 1% decline in US GDP could lead to a 0.3 to 0.5 percentage-point decline in Malaysia's economic output. The country's strong economic fundamentals and government initiatives are expected to cushion the impact of a potential downturn in the US economy. However, SERC's executive director, Lee Heng Guie, warned of further risks and challenges to the global economy, including the slowdown in China's economic growth and ongoing trade wars and crises in the Middle East.
HSBC Global Research and Kenanga Investment Bank also maintain their growth forecasts for Malaysia, with HSBC Global Research keeping its forecast at 4.5% for the second half of 2024. The central bank of Malaysia, Bank Negara Malaysia, anticipates economic growth between 4% and 5% for the year.
Recent data from Malaysia's Department of Statistics shows a strong year-on-year growth of 5.8% in Q2 2024, driven by consumer spending and export activities. This growth aligns with the positive economic outlook for Malaysia.
HSBC's head of Asia foreign exchange research expects the Malaysian ringgit to remain stable against the US dollar, hovering around 4.68 by year-end. This assessment highlights Malaysia's economic resilience and growth potential amidst global economic uncertainties.
In addition to Malaysia, Indonesia's economic growth remains strong, supported by domestic demand and ongoing infrastructure development. The Indonesian government projects that the country's economic growth will remain strong, ranging from 4.7% to 5.5% year on year. Bank Mandiri Research predicts that Indonesia's economy will grow by 5.06% in 2024, and Head of Macroeconomic & Financial Market Research at Bank Mandiri, Dian Ayu Yustina, believes that Indonesia's economy will remain resilient in the face of global turmoil.
India's economic growth is also expected to remain firm over the next two years, supported by strong economic momentum and improving macro and political stability. This positive outlook for India's economy aligns with the current positive economic outlook for Malaysia and Indonesia.
China is expected to introduce aggressive policies to shore up its economy and help Malaysia overcome the adverse effects of a US recession. Malaysia's strong economic relationship with China is predicted to cushion the impacts of a possible global recession. Tan Teng Boo, managing director of Capital Dynamics Asset Management, believes Malaysia's economy will grow relatively better than other countries due to its links with China. He also predicts that Bursa Malaysia's FBM KLCI will end the year at the 1,600 level and the ringgit between 4.40 to 4.50. The US recession is described as potentially unprecedented, with limited policy space for the US government. Tan expects the US to cut interest rates significantly, possibly to near zero. Bank Negara Malaysia may retain its overnight policy rate at 3.00 percent. China is in an excellent position to use fiscal measures to support its economy and has plenty of room to loosen its monetary policy. China has been Malaysia's largest trading partner since 2009, making up 14 percent of exports. Tourist arrivals from China have increased by 200 percent over the same period last year.
Minister of Investment, Trade, and Industry Tengku Datuk Seri Zafrul Abdul Aziz is optimistic about Malaysia’s economic resilience in the face of potential recession in the United States (US), based on the country’s current performance. Malaysia's economic indicators, including controlled inflation rates and a projected growth rate of 5.8 percent for the second quarter, provide strong support. The Minister emphasized the need for the country to prepare for adverse situations by focusing on resilient industries. He mentioned that the recently announced National Semiconductor Strategy (NSS) is a long-term program extending to 2030 and is considered relatively resilient. Green financing needs to be expanded to all companies in Malaysia, particularly small and medium-sized enterprises (SMEs), to foster the development of green industries and trade. The government is discussing with various parties, including the financial and banking sectors, to focus more on loans supporting these companies. [c3d519c3]