MARC: Sees slower 5% economic growth in Malaysia
PETALING JAYA: Malaysian Rating Corp Bhd (MARC) expects Malaysia’s economic growth to taper off to 5% this year from 5.6% in 2012, as weaknesses in the export sector may constrain the economy.
The rating agency said in its second half economic outlook report yesterday that Malaysia’s economic performance would likely improve as external headwinds slowly dissipate, exerting less downward pressure on commodity prices.
“At the same time, strong lending to consumers, particularly for consumer credit and residential properties, will persist while the impact of robust investments in mega projects continue to trickle through the economy, benefiting ancillary activities in the second half of 2013.
“Overall, however, we are of the view that the average headline growth will likely taper off to 5% in 2013 from 5.6% in 2012,” it said.
MARC noted that the softer-than-expected gross domestic product (GDP) growth in the first quarter of 2013 further supported the belief that there would be some form of monetary response in the near term if the growth momentum continued to change its trajectory towards the downside.
The rating agency believes speculation is rife that the weakness in Malaysia’s trade performance, owing to sharp declines in commodity prices, is giving another reason to argue that Malaysia’s overnight policy rate may reverse its course to accommodate and ensure that its headline growth will be at least 5% this year.
However, MARC said it disagreed with this view. “While we acknowledge that GDP growth may taper off in the first half of 2013, we are of the opinion that it is not sufficient to induce policy makers to consider lowering the policy rate.
“There are indeed compelling reasons to think that Bank Negara will try to resist any measures that can be seen as too accommodative. The main reason is the lingering problem of high household debt level. As previously mentioned, Malaysia is struggling to contain its household debt which surpassed the 80% level against GDP in 2012.”
MARC noted that measures imposed by the central bank, the most prominent being the prudent lending guidelines introduced in January 2012, have to some extent tempered household enthusiasm in some loan segments.
“Credit card loan growth slowed to 1.2% in April, while loans for personal use eased to 8.7% in April, the lowest in five years.
“Notwithstanding this, loan growth for residential property purchases and purchases of passenger cars remain stubbornly elevated at 12.7% and 9% respectively in April.
“What is more pressing is the surge in growth rates of lending by non-bank institutions.”