Fund managers and analysts continue to be positive on Malaysia despite the World Bank cutting its gross domestic product (GDP) growth forecast for 2018 to 4.9% from 5.4% on the back of slowing export growth and lower public investment.
They feel that the slowing GDP is to be expected, following the many cost-cutting measures that are being undertaken by the current government. These are now the painful measures that need to be taken to right the economy that has been mismanaged for decades.
The investment fraternity would rather see a slow growth over the short period, if that results in a stronger and more resilient economy over the longer term.
The World Bank is expecting Malaysia’s pace of economic expansion to continue moderating until 2020.
Datuk Seri Cheah Cheng Hye, the chairman and co-chief investment officer of Value Partners Group Ltd in Hong Kong, said that many other economies are also experiencing the same lowering of expectations.
“Next year, the World Bank and other sources are looking for roughly 4.5% type growth, which frankly I think is quite ok, because we are living in a world of uncertainty and there is a trade war between the US and China. So, Malaysia is holding up. It’s not too bad at all. More importantly, I think the longer-term issue for the country is a structural one,” said Cheah.
“All the electorate knows now is that there is a lot of painful medicine. They do not realise that the painful medicine is a result of past pains. The medicine must be applied now to resolve the issue.”
He pointed out that Malaysia’s election cycle is one which takes place every five years.
“The Pakatan Harapan coalition has won, but it has to get a new mandate five years from now. However, the structural reforms that we need to implement usually will take well before five years to deliver. So, I always worry that before the government can deliver the reforms, it’s already time for another election.”
Chief executive officer (CEO) and fund manager at Inter-Pacific Asset Management Sdn Bhd Lim Tze Cheng said that the GDP is one of the many economic indicators to evaluate the state of affairs of a country.
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