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Malaysia Economic Forecast In 2016

February 04, 2016 | Sharon Cheong

As reported before, Malaysia's political polarization has directly affected its economy. Prime Minister Najib Razak's government was more concerned with entrenching their positions by implementing security measures to strengthen their roles in the National Security Council rather than concentrate on ensuring Malaysia's positive economic outlook in the future. This soon changed when it came to their attention the slowing of the Malaysian economy. 

Malaysian Economic Prospects in 2016 

Here are the expectations and realities for Malaysia's 2016 economic prospects. 

  • Tepid, Mediocre, and Slow 2015 Economy: All throughout 2015, the Malaysian economy slowed. There's sagging consumer confidence that directly affected private consumption for one thing. Then there's the slowing credit growth to households, various signs of a softening in the labor market, and the new tax on goods and services. Exportation prospects have also become less than satisfactory. 
  • Multiple Sector Downturns and Poor Business Sentiment: The sparse manufacturing capacity, a slide in stock prices, lackluster performance on the export front, and the depreciation of the Malaysian Ringgit combined have affected business sentiment in Malaysia. With that said, there's a silver lining to this cloud as far as 2016 is concerned. 
  • Growth Stimulation through Fiscal Policy: PM Razak's administration has shifted priorities from political entrenchment to growth stimulation through fiscal policy. While this is admirable, their efforts are limited by their own pledge to narrow down the government's budget deficit. Easing interest rates is easier said than done in light of concerns regarding capital outflows and household debt. 
  • Gradual Growth and Stabilization for Malaysia 2016: Although it should come more gradually than initially expected, 2016 is still expected to edge up on economic growth for the country. To be more specific, it's expected for the Malaysian economy to recover and rebound by the second half of 2016 according to Selina Ling, the OCBC Bank Bhd Chief Economist. 
  • 2016 Is a Promising Year for Malaysia: The projected growth rate in Malaysia is 4.7 percent for 2016 because of the expectation of oil prices rebounding by between $45 per barrel in Q3 and $50 per barrel in Q4. This is in line of all the fiscal changes and small economic victories (in the realm of exports and continued if slowed-down growth) Malaysia achieved so far in Q4 2015. 
  • Boosts in 2016 to Counter Downturns in 2015: In a nutshell, it's projected by analysts and experts that in 2016, Malaysia will experience an upsurge of prospects for economic improvement in major industrial economies. There should also be boosts in demand for commodities and oil in Malaysia. That's the reason behind the optimistic 4.8 percent projected growth rate for the country after six months from now. 

Improved Economic Growth and Demand 

OCBC Bank's Miss Ling told a media conference on 2016 that export resilience and stable growth as well as imports correction has lifted the exportation strength of Malaysia by leaps and bounds since the export sector's uninspiring performance for most of 2015. Malaysia is depending on its relatively robust trade balance that's shaping up to be the country's primary spearhead towards total economic recovery. 

She also said that the slump in commodities such as natural gas has been buffered by a high proportion of Malaysian electronics exports. However, in Q3 of 2015, private consumption remains as slow as ever at 4.1 percent. Thankfully, companies like Servcorp exist to help out Malaysian SMEs in stimulating the economy with their affordable virtual office and serviced office packages. Please call +603 2169 6188 for more information.