Malaysia's economy still strong and resilent

KUALA LUMPUR -- Despite uncertainty in global developments, Malaysia's economy is fundamentally strong and resilient, says Finance Minister Lim Guan Eng.

He said with this, coupled with good governance and fiscal responsibility, the only way to go for the country is up.

He said as a global trading nation, Malaysia is not immune to downside risks in global economic growth and given its deep and open foreign exchange market, the ringgit is not spared from facing adjustments. 

"However, it is necessary to note that the FTSE Bursa Malaysia Kuala Lumpur Composite Index is one of the best performers in Asia Pacific year-to-date with a slight increase of 0.13 per cent as of Sept 7.

"In comparison, the Singapore Straits Times Index and the Nikkei 225 index decreased by 8.29 per cent and 1.72 per cent respectively over the same period,” Lim said in a statement today.

Over the year-to-date, the ringgit remains one of the most resilient regional currencies against the US dollar, depreciating by 2.6 per cent against the US dollar since the start of the year.

Lim attributed the strength of Malaysia’s economy to eight factors – steady growth; highly diversified economy; favourable labour market conditions; healthy current account surplus; flexible exchange rate; sufficient external buffers; low inflation rate; and the unique investment for Malaysia created by the trade conflict between China and the United States.

The tariff wars between the world’s two largest economies have resulted in many companies, particularly large manufacturers – both from the US and China – seeking to site their plants and factories in Malaysia, which is seen as a natural safe investment harbour.

"Our education levels, quality of hard and soft infrastructure as well as the fluency in both English and Chinese give us the natural edge over our neighbouring competitors such as Thailand, Vietnam or Indonesia.

"At the same time, we remain a significantly cheaper investment destination than countries such as Singapore, and Hong Kong,” he said.

Lim said Malaysia's international reserve position of US$104.4 billion is adequate to facilitate international transactions.

Furthermore, international reserves account for only a quarter of Malaysia’s total external assets.

Banks and corporations hold three-quarters of Malaysia’s external assets, at RM1.3 trillion as at the end of the second quarter of 2018, which can also be drawn upon to meet external debt obligations (RM740.9 billion) without creating a claim on international reserves.

The country’s financial institutions also remain well-capitalised with sufficient liquidity to support intermediation within the economy, said Lim.

Citing the Malaysian Institute of Economic Research (MIER), he said the consumer sentiment index breached the 100-point optimism threshold at a 21-year high of 132.9 in July 2018, which suggests that consumer spending in the next few months will remain strong.

Similarly, he noted, the MIER business conditions index registered 116.3 points in July 2018, its highest level since 2015.

Lim said the government is also determined to put in all necessary measures to ensure that corruption and abuse of power are eradicated from the nation’s administrative system.