Malaysia Country Risk Report

Providing comprehensive data and in-depth analysis of political, financial and economic risk.

Report includes: BMI's Core Views, 10-year Forecasts, BMI's Economic Risk Index, Political Stability and Risk Index, Long-term Political Outlook, Operational Risk Index, SWOT Analysis and Structural Economic Sections

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  • Understand and measure the political, business environment and operational risks to your company
  • Gain insight on emerging trends that could support, strengthen or disrupt your activities in the market
  • Benefit from 10-year macroeconomic forecasts and insight into the structural characteristics of the economy
  • Get the long-term political outlook and explore possible scenarios for change
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Malaysia Country Risk Report
Product Price
$1,195.00

Core Views

  • Ongoing weakness in the Chinese economy and domestic headwinds will continue to weigh on Malaysia's economic growth. However, we expect accommodative monetary and fiscal policies to lend some support to the economy, and we forecast 2016 real GDP growth to come in at 4.5%.

  • The relatively successful implementation of GST in April 2015 and ongoing efforts to strengthen the revenue collection system bode well for Malaysia's fiscal position even as petroleum revenues continue to fall. With GST's share of government revenue increasing slowly, we maintain our forecast for the country's 2016 fiscal deficit to come in at 3.1% of GDP, and note that Malaysia remains on the path of gradual fiscal consolidation.

  • In line with expectations, BNM kept its OPR steady at 3.25% during its May 19 monetary policy meeting. We maintain our forecast for rates to remain on hold throughout the year as the central bank seeks to support growth against a backdrop of external headwinds.

  • The Malaysian ringgit has traded within a tight range over the past few months, and we expect the currency to remain range bound amid continued uncertainty in global financial markets. As such, we maintain our 2016 average forecast at MYR4.100/USD and forecast the currency to appreciate gradually over the longer term as an undervalued real effective exchange rate and a modest current account surplus provide structural support.

  • Malaysia's ruling BN coalition's convincing victory during the two by-elections held on June 18 indicate that embattled PM Najib Razak still holds a considerable degree of support from the electorate. As such, we maintain our view that Najib will continue to consolidate his position and is likely to remain as PM until the next general election in 2018.

Major Forecast Changes

  • We have downgraded our 2016 end-year forecast to MYR4.050/USD from MYR3.950/USD previously to reflect turmoil in global financial markets as a result of the decision of the UK to leave the EU on June 24.

Key Risks

  • Malaysia's economy is relatively well diversified and not particularly at risk from external shocks. The largest threat to the Malaysian economy comes from a rapid unwind of the household credit boom that has taken place over the past few years since the global financial crisis. This has the potential to result in a collapse in domestic demand amid declining property prices. This is not our core view, however, as debt service ratios remain manageable at current levels.

  • Increasing economic dependence with China could also have an adverse effect on the Malaysian economy should the Chinese economy experience an acute slowdown.

Macroeconomic Forecasts (Malaysia 2014-2017)
Indicator 2014 2015 2016f 2017f
National Sources/BMI
Nominal GDP, USDbn 327.0 296.3 302.8 335.7
Real GDP growth, % y-o-y 6.0 5.0 4.5 5.0
Consumer price inflation, % y-o-y, eop 2.7 2.7 2.7 2.1
Exchange rate MYR/USD, eop 3.50 4.29 4.05 3.90
Budget balance, % of GDP -3.5 -3.2 -3.1 -2.8
Current account balance, % of GDP 4.6 2.7 2.6 2.7
Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks
5
Chapter 1: Economic Outlook
7
SWOT Analysis
7
BMI Economic Risk Index
7
Economic Growth Outlook
8
Growth To Slow In 2016
8
GDP By Expenditure Outlook
9
TABLE: GDP GROWTH FORECASTS
9
TABLE: PRIVATE CONSUMPTION FORECASTS
9
TABLE: GOVERNMENT CONSUMPTION FORECASTS
9
TABLE: FIXED INVESTMENT FORECASTS
10
TABLE: NET EXPORTS FORECASTS
10
Fiscal Policy And Public Debt Outlook
10
Fiscal Consolidation Moving In The Right Direction
10
Structural Fiscal Position
11
TABLE: MAIN EXPENDITURE & REVENUE CATEGORIES
11
Monetary Policy
12
Rates Remain On Hold As Zeti Bids Adieu
12
Monetary Policy Framework
13
Currency Forecast
14
MYR: Neutral Short Term, Appreciatory Bias Thereafter
14
TABLE: BMI CURRENCY FORECAST
14
Outlook On External Position
15
TABLE: MAIN IMPORTS & EXPORTS
15
TABLE: MAIN IMPORT & EXPORT PARTNERS
16
TABLE: CAPITAL & FINANCIAL ACCOUNT BALANCE
16
Chapter 2: 10-Year Forecast
19
The Malaysian Economy To 2025
19
Productivity Gains To Support 4
19
TABLE: LONG-TERM MACROECONOMIC FORECASTS
19
Chapter 3: Political Outlook
23
SWOT Analysis
23
BMI Political Risk Index
23
Domestic Politics
24
Citizens' Declaration Unlikely To Result In PM's Resignation
24
TABLE : POLITICAL OVERVIEW
24
Long-Term Political Outlook
25
Race Relations Still Cloud The Horizon
25
Chapter 4: Operational Risk
29
SWOT Analysis
29
Operational Risk Index
29
Operational Risk
30
TABLE: OPERATIONAL RISK
30
Economic Openness
31
TABLE: TOP 5 IMPORT PARTNERS, 2010 - 2014, (USDMN)
31
TABLE: FREE TRADE AGREEMENTS
32
TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
33
Availability Of Labour
36
TABLE: ASIA - AVAILABILITY OF LABOUR
37
TABLE: TOP 10 SOURCE COUNTRIES FOR MIGRANT WORKERS
38
Chapter 5: BMI Global Macro Outlook
41
Global Macro Outlook
41
Emerging Markets Nearing Inflexion Point
41
TABLE: GLOBAL ASSUMPTIONS
41
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
42
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
42
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
43
TABLE: MACROECONOMIC DATA & FORECASTS
45

Assess your risk exposure in Malaysia with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Malaysia with confidence.

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