Country Forecast Malaysia April 2018 Updater

Country Forecast Malaysia April 2018 Updater

  • April 2018 •
  • Report ID: 470384 •
  • Format: PDF


  • The Economist Intelligence Unit expects the ruling Barisan Nasional (BN) coalition to dominate parliament throughout 2018-22. The next general election is due by August 2018, but it is likely to be held in late April or early May.
  • Despite the scrutiny surrounding a state-owned investment firm, 1Malaysia Development Berhad, the United Malays National Organisation (UMNO), the party of the prime minister, Najib Razak, is likely to retain its support among rural voters, owing partly to Malaysia's relatively tight censorship laws and the government's control of the media. Given the fragmented nature of the opposition, which comprises two separate groups, we expect UMNO to increase its share of the urban vote at the next election and remain the dominant party in the BN coalition.
  • The construction of a high-speed rail link in 2018-22 to connect the Malaysian capital, Kuala Lumpur, with Singapore will deepen economic ties between the two countries. A dispute over the sovereignty of Pedra Branca island and its surrounding waters is likely to rumble on in a low-key fashion in the forecast period, but we do not expect this to have a significant impact on economic or diplomatic ties.
  • Bank Negara Malaysia (the central bank) embarked on a monetary policy tightening cycle in January 2018, when it sanctioned a 25-basis-point increase in the overnight policy rate. We expect it to sanction another rate rise of 25 basis points in 2018 and that it will continue to tighten policy in 2019, before pausing in 2020.
  • We expect real GDP to grow by 5.5% in 2018. Real GDP growth will be comparatively subdued in 2019-22, at an annual average of 5.4%, owing in part to our expectation that the US economy will record a technical recession in 2020.
  • The current-account surplus will decline as a proportion of GDP in the forecast period, from 2.8% in 2018 to 2.6% in 2022. This trend will reflect the failure of policymakers to move Malaysia up the goods-and-services value chain-a development that would significantly increase export receipts and their share of GDP. Intermediate electronic goods and a handful of commodities will continue to account for the bulk of total exports.


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