Thailand
HSBC expects 5.6% GDP growth for Malaysia this year
PETALING JAYA: HSBC expects the economic recovery in Malaysia to be quite strong this year, with the gross domestic product (GDP) set to expand 5.6% despite the impact of the recent floods in the country.
James Cheo, chief investment officer for South-East Asia at HSBC Global Private Banking and Wealth, said key drivers to the nation’s growth would be a higher consumption level, an influx of infrastructure spending that has been on hold for the last two years, and buoyant foreign direct investment.
He also believes that many companies would resume their expansion activities this year, as their plans had been held back the last two years due to the pandemic.
“It’s very likely that this year will be the year in which companies will start to invest and grow their operations, especially with the huge long-term prospects for South-East Asia,” he said yesterday during a virtual media briefing on HSBC’s Investment Outlook 2022.
“I think the pillar of growth for Malaysia is going to be largely consumption, investment, and support from the manufacturing sector which will still be very robust.
Cheo expects the inflationary pressure to be a little bit lower this year, at around 2.1%, and that would lead to Bank Negara being very gradual in its monetary stance tightening in the second half of the year.
“Perhaps they are looking at a 50-basis-point increase (in the overnight policy rate) this year,” he said, adding that the central bank could have a policy buffer in light of Omicron.
He said the fiscal policy would likely remain expansionary in 2022 with a budget deficit target of 6% of GDP, compared with a targeted deficit of 6.5% in 2021.
On the external front, Fan Cheuk Wan, the bank’s managing director and chief investment officer, expects global economic growth and earnings to moderate but remain respectable in the mid-cycle phase this year.
She said global interest rates should remain well below normal despite faster tapering and rate hikes by the United States Federal Reserve (Fed), extending the “low but volatile” rate environment.
“We expect that inflation will come down some time in 2022 and the five rate hikes that we expect from the US Fed between March 2022 and September 2023 are still slower than what we have seen in the previous US tightening cycles,” she said.
“This should remain supportive of our risk-on strategy with overweight allocation to global equities and preference for US, European and Asian equities.”
Meanwhile, Cheo said South-East Asia is expected to experience a growth spurt, growing by 5.2% this year compared with a mere 3.6% last year, and this would boost company earnings growth to 12.3%.
“The game changer for South-East Asia is the implementation of the Regional Comprehensive Economic Partnership or RCEP, the world‘s largest free trade agreement, which will bring deeper trade and investment integration for the region.
“With the reopening of the borders, consumption for South-East Asia is expected to recover strongly this year with tourism the wild card.
“Investors should not ignore South-East Asia in 2022,” he said. — Bernama