Malaysia's 2013 GDP to hit 5.4%: UBS
Check out the growth drivers.
According to UBS, Malaysia's real GDP expanded 6.4% yoy (cons. 5.5%) in Q4 after 5.3% in Q3. UBS says that with an improving export environment, it revises its 2013 real GDP forecast to 5.4% (from 4.7%).
Here's more:
Public sector support to fade, exports to improve in 2013. Although we expect exports to prove better on average in 2013 than in 2012, imports should also recover from their relative weakness in Q4 2012.
Stronger imports will subtract from the income gains arising from improved exports.
Additionally, fiscal consolidation post the General Election (due by end June) should dampen domestic demand in H2 2013. Government budget projections are for public investment spending to fall as a share of GDP in 2013.
We also expect some form of subsidy reform (towards less subsidies) post election, although the impact on consumption of this may be compensated by cash handouts.
Monetary policy may also be tightened at the margin if subsidy cuts and recent growth combine to push inflation higher as we expect.
External surplus implies financial cushion going into election. The rise in the current account surplus from 4% of GDP in Q3 to 9.4% in Q4 2012 was a result of weaker domestic demand growth and a lagged decline in imports after prior export weakness.
Not in themselves signs of economic strength.
However, the current account surplus does imply a healthy gap between national income and domestic demand – a gap that should support Malaysian financial markets in the face of investor uncertainty with regards to the General Election outcome.
Our base case is for a relatively benign election outcome for the economy and for the ringgit to regain some ground relative to peers by year end 2013. Nonnegligible risks to that view include an unclear election outcome or an illiberal economic agenda on the part of the post-election government.