First Half 2015 Malaysia Business Review

September 18, 2015 | Sharon Cheong

Malaysia has a large urbanized population with good basic labor skills, along with excellent seaports and these factors have contributed to their steady economic growth. Though the forecasts for 2015 were high in many sectors, the first half of the year showed weaker than normal growth. In the second quarter of the year, Malaysia's growth slowed to 4.9% after posting rises of around 5.6% in the preceding three quarters. The weakest growth in two years was experienced in the Q2 and attributed to a new Goods and Services Tax (GST) implemented in April.

Import and Export Business

A few of the major Malaysian exports were reduced in value due to several factors, one of which was the troubling political events. The country's prime minister was involved in a scandal and this caused investors to lose faith in the country's political position.  Though these issues have not been resolved to date, economic forecasters are predicting growth for the coming twelve months.

In addition to great seaports, Malaysia has well-connected inland transportation to major hubs in neighboring countries.Malaysia's most vital industries are continuing to grow, including the manufacturing sector, private and public construction and tourism. Many of the larger banks eased monetary conditions. Growth remains steady at 4.5 to 5.5 per cent with domestic demand one of the greatest contributing factors.

The Banking Industry

Bank Negara Malaysia in Kuala Lumpur kept the costs of borrowing money relatively the same and foreign markets have continued to function with the same strength and stability as in the past. The experts expect the economy to stabilize even more as domestic and external factors become less uncertain.  The Monetary Policy Committee remains supportive of vibrant economic activities and major banks report seeing a healthy growth in all types of financing.

Investment Opportunities

While the overall impact of inflation has weakened in Malaysia, China's economic woes have dampened the spirits of investors and small business owners. Many are playing it safe right at the moment, waiting to see how China stock market prices do through the end of the year. During the summer, the inflation rate stayed around 2.9 percent with slightly higher fuel prices. Lower global inflation rates have also helped to keep commodity prices reduced.

Domestic Spending Figures

The Central Bank is predicting a continuation of economic expansion during the remainder of 2015 despite the troubles seen in China. Household spending has risen and is being supported by stronger growths in wages and stable labor markets. Though there is some uncertainty in the world markets, the Malaysian banking system is encouraging robust investment activities especially in the manufacturing and services sectors.

Domestic demand is expected to drive economic growth in spite of the weak performance of foreign markets. Though the experts agree that Malaysia is entering a challenging period, they expect the nation to remain a vital player in import, export and manufacturing. Tourism and trade will also add to their position of strength, along with a low unemployment level.

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