Boston, MA -- (SBWIRE) -- 12/04/2014 -- Core Views

- Malaysia's once-bloated current account surplus is coming under pressure from a combination of income account outflows and a dwindling trade surplus. We expect the narrowing of the surplus to continue, forecasting it to come in at 2.5% of GDP in 2014 and 1.6% in 2015. However, the risks are weighted to the downside, with the emergence of a current account deficit over the next few years increasingly likely.
- Over recent years Malaysia's fiscal accounts have exhibited some worrying trends, with spending rising as a share of GDP, subsidy spending rising as a share of total spending, and indirect tax revenues declining. Going forward we are optimistic that these trends will be halted as subsidy spending is reduced and a Goods & Services Tax (GST) is implemented, which should help stabilise Malaysia's debt metrics and support private sector real GDP growth.
- Bank Negara Malaysia (BNM) will find itself under increasing pressure to hike interest rates over the coming months as consumer price inflation (CPI) pressures mount following the reduction of fuel and electricity subsidies. However, we expect the central bank to maintain the policy rate at 3.00% amid growing disinflationary signs emanating from weakening money supply growth, which should see CPI pressures ease in H214.

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Major Forecast Changes

- We have revised down Malaysia's current account surplus for 2014 and 2015, forecasting it to come in at 2.5% of GDP in 2014 and 1.6% in 2015, rather than the 3.5% and 2.7% previously expected. Even with these revisions, the risks are weighted to the downside as the pickup in domestic investment activity and the still-wide consolidated public deficit pose risks of a current account deficit over the coming years.

Key Risks To Outlook

- Malaysia's economic outlook remains vulnerable to external shocks. This is compounded by increased public spending on welfare subsidies in recent years. We caution that the government's failure to address its fiscal...

The Malaysia Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Malaysia and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Malaysia's economic, political and financial prospects through end-2018, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

- Forecast the pace and stability of Malaysia's economic and industry growth through end-2018.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
- Contextualise Malaysia's country risks against regional peers using BMI's country comparative Risk Rankings system.
- Evaluate external threats to doing business in Malaysia, including currency volatility, the commodity price boom and protectionist policies.

The Malaysia Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Malaysia economic policy-making and performance impact on corporate profitability over 2014-2018?

BMI provides our fully independent 5-year forecasts for Malaysia through end-2018 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Malaysia Business Forecast Report features BMI's forecasts with supporting analysis for 2014 through to end-2018, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Rankings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).

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