Nomura Securities ups Malaysia GDP forecast to 6%

by **Cals** Mon 18 Aug 2014, 22:15

Business & Markets 2014

Written by Sulhi Azman of theedgemalaysia.com

Monday, 18 August 2014 09:28

KUALA LUMPUR: Nomura Securities Malaysia Sdn Bhd has raised its 2014 gross domestic product (GDP) growth forecast for Malaysia to 6% from 5.4%, following the country’s robust economic growth of 6.3% in the first half of this year.

“We are upgrading our 2014 GDP forecast to 6% from 5.4%, [after] taking into account the stronger-than-expected first half. It also reflects our view [that] the export outlook remains positive,” Nomura Securities economist Euben Paracuelles told The Edge Financial Daily.

Bank Negara Malaysia announced last Friday that the economy grew 6.4% in the second quarter of 2014 (2Q14), above 1Q growth of 6.2%, driven by stronger exports and continued strength in private domestic demand.

“The growth was also in line with our long-held view that an export-led recovery is underway, which, as the 2Q14 data shows, is being sustained further.

“This lifts a lot of boats in Malaysia as the export outperformance had plenty of spillovers into domestic demand. [It] supports the current account surplus and allows the government to focus on the fiscal reforms,” said Paracuelles.

Meanwhile, London-based Nomura International Plc senior political analyst Alastair Newton (pic) told The Edge Financial Daily that Malaysia is heading in the right direction to become a high-income nation by 2020.

“Malaysia is on the right track towards achieving the high-income path, given various economic and government transformation initiatives, along with the five-year Malaysia plan,” he said in an interview at the conclusion of the Nomura Asset Management Breakfast Conference last week.

According to the World Bank, middle-income countries are defined as having a per capita gross national income (GNI) of between US$1,045 (RM3,291.75) and US$12,746. These countries, it said, have a total population of five billion and account for one-third of the global GDP.

The government, through the Performance Management and Delivery Unit (Pemandu), targets to raise Malaysia’s GNI per capita to US$15,000 by 2020 from the current US$10,600.

Reflecting on the potential impact from the tapering of stimulus programmes in the United States and China, Newton said Malaysia remains potentially susceptible as it is quite open to foreign capital inflows and outflows.

“There is a lot of cautious note on how Malaysia will cope with the onset of tapering. Actually, I think it does not have any negative impact on Malaysia at all, as the country has coped very well with the tapering despite those concerns out there,” he said.

On the current political climate, Newton said Malaysia is a “strong country” that has weathered many political challenges.

“The country has remained a beacon of strong democracy since independence in 1957, and I think overall that’s positive for economic prospects. The election results last year were solid and well within my expectation,” he said, adding that Malaysia has generally come “a long way” over the last 1½ years since the 13th general election.

In reviewing the global geopolitical scenario, Newton said the first half of this year saw “no shortage of political events” which in other circumstances could have triggered significant shifts in market sentiment.

“It tends to be country-specific, especially where political risks — both upside and downside — have had an impact on market sentiment. For example, the recent elections in India and Indonesia, both emerging markets, have driven a significant uptick in investor sentiment.

“As for the Ukraine-Russia tensions, although the visible market impact was limited, we have seen general trimming of Russia-related risk,” he said.

Looking ahead from the perspective of political risks, Newton expects to see stronger market shifts in response to political events with broad risk aversion rising accordingly, albeit still largely on a country-specific basis.

“From the perspective of political risk, I see the big question for the remainder of this year is whether this relatively benign overall context will persist. I think the answer is that it will not, at least not till year-end,” Newton concluded.

This article first appeared in The Edge Financial Daily, on August 18, 2014.