Thailand
Malaysia: Current account surplus unlikely to be threatened
KUALA LUMPUR: It is unlikely that Malaysia’s healthy current account surplus position will be threatened in the near future, says Affin Hwang Capital Research head of research and chief economist Alan Tan.
“Concerns were highlighted by certain foreign investors in Hong Kong and Singapore recently, where they said the current account surplus might be threatened.
“This is because the government is undertaking some infrastructure projects which require the import of high-value capital goods,” Tan told reporters on the sidelines of the International Institutional Investor Series 2019, organised by the Malaysian Association of Asset Managers.
“The current account surplus would remain ample, if exports continue to hold up. The concerns raised by fund managers abroad would be a situation where Malaysia’s exports are impacted by the trade tensions and if commodity prices weaken, while at the same time imports of capital and consumption goods hold up.
“This may put further downward pressure on the current account surplus, where there may be a smaller surplus,” he added.
Despite these concerns from investors abroad, Tan said Malaysia’s exports are diversified, which can hold up the current account surplus position.
“Even though the export of electronics slows, this would be offset by other exports of petroleum-related products and palm oil. Malaysia’s exports are also held up well by oil prices which are expected to remain steady,” Tan said.
He said in light of these uncertainties, it was important that the government continued to keep to its fiscal discipline and prudence.
“We also know that in times of uncertainty, there may be a time when the government has to spend a little bit more to support the economy through development expenditure.
“But before any probable downturn or crisis comes, it would be important for them to safeguard the country’s financial position so that when the time comes, they can introduce new fiscal stimulus measures that would help support the domestic economy,” Tan said.
On the ongoing trade war between the US and China, Tan said domestic demand that is healthy and strong would certainly offset any effects to exports from the trade tensions.
“Right now, we are expecting Malaysia’s gross domestic product to grow by 4.5% in 2019 and similarly in 2020 as well,” he said.
Source: https://www.thestar.com.my/business/business-news/2019/06/26/current-account-surplus-unlikely-to-be-threatened/#kUEBIp8KDTpFvhbz.99