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2015 Malaysia Business Review

January 18, 2015 | Sharon Cheong

Because of the recent polarization of Malaysia's political scene, Malaysia's economy has had a roller coaster of a year. As of December 7, the United Malays National Organization's deputy leader has publicly called for the maligned Prime Minister Najib Razak to step down from office. Meanwhile, the much-criticized administration intensified its efforts to entrench their positions, strengthening the PM's roles within the National Security Council and the powers of the government. 

The Malaysian Economy Roller Coaster of 2015 

Critics are skeptical about the PM's reasoning that his administration's actions are necessary to fight worldwide security threats. The PM's disapproval rates and questionable governing soon bore fruit with the Malaysian Ringgit's collapse in 2015. The upside to this is that in Q4, Malaysian exporters were given a price advantage of sorts up until 2016. 

Here are the major 2015 events as far as the Malaysian economy is concerned: 

  • China's Deceleration and U.S. Demand: The Chinese economic deceleration has impacted Malaysia significantly, which could hinder its projected 2016 growth the same way it did all throughout 2015. However, some of that drag should be offset by U.S. demand of Malaysian products and services. 
  • Industrial Production Percentages: In October 2015, Malaysia's industrial production rate increased by 4.2 percent, which was about the same rate as October 2014. Nevertheless, it's lower than the September 2015 rate that had a 5.1 percent increase.  All-in-all, this is still a good showing because there was no plummet in rates, just a slight lowering. 
  • Monthly Basis Production Rates: There's a 0.4 percent fall in the industrial production of the country on a monthly basis after its brief 2.4 percent increase in September. Regardless, it still stayed within favorable bounds because of strong manufacturing improvements and electrical component gains. Quite a lot of mining equipment was contracted from the country as well. 
  • Export Percentages: In September, exports had a 17.9 percent fall. In October, there was an even bigger 20.8 percent fall. However, the Malaysian Department of Statistics reassures that the ongoing exportation decline was moderated by advances in machinery and manufacturing goods exportation. 
  • Export Contraction Rates: Exports also went down to 7.2 percent contraction on October 2015 since the 18.5 percent contraction of September 2015. This marks 13 months (or more than a year) of consecutive falling export numbers since global demand has gone down overall. This is, however, less severe than previous analyst expectations. 
  • Bottoming Out the Downward Spiral: The good news in regards to the October 2015 contraction rate is that it's milder than expected. In fact, it's the mildest contraction since December of last year. The exportation downward spiral might soon come to the end for Malaysia, which means it could have a better economic outlook in 2016. 

What to Expect in 2016 and Beyond 

According to Focus Economics Consensus Forecast panelists, they expect the Malaysian GDP to expand by 4.6 percent in 2016 at the rate Malaysia's economy is currently going. As for 2017, the forecast is 4.7 percent GDP growth. As for industrial production, it's expected to grow by 3.3 percent in 2016 and 4.0 percent in 2017. 

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