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 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 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.
In a recent statement, Bank Negara Malaysia (BNM) governor Datuk Seri Abdul Rasheed Ghaffour emphasized the need for Malaysia to prepare buffers against the changing global economic environment. He highlighted the importance of economic diversification to absorb challenges, noting that Malaysia's exports are well-diversified, with 14% to China, 12% to the US, and 27% to ASEAN economies. The upcoming US presidential election on November 5 is a key factor being monitored, particularly regarding Donald Trump's proposed policies on tariffs, immigration, and tax cuts, which could have inflationary impacts. Abdul Rasheed expressed optimism about China's economic stimulus package, hoping it could help achieve a growth rate of around 5.0%. He noted that interest rates will be determined based on data and economic outlook, with the current policy rate at 3.0%. The recent 50-basis point cut by the US Federal Reserve is seen as beneficial for Malaysia, reducing the interest rate differential. [ea0b422d][78275ffc][f06d0252][d09689f7]