Despite the current uncertainties, Franklin Templeton Investments executive director and head of Malaysia Fixed Income & Sukuk, Hanifah Hashim, said she expects Malaysia to remain resilient in macroeconomic terms.
“Although we see some potential for setbacks in GDP growth over the next year or two, we believe growth could pick up again by mid-2016. Malaysia’s economic picture appears healthier over the longer term, as the impact of oil prices and the country’s fiscal deficit position could begin to narrow as planned,” she said in an analysis on the Malaysian economy.
Private consumption, meanwhile, is also set to remain healthy, Hanifah added.
“Coupled with the government’s support for domestic infrastructure development, we believe it will likely lead to positive developments such as job creation, increased quality of life and economic efficiency, which we believe can be sustained over the long term.”
On the fiscal front, Hanifah said Franklin Templeton’s projections for non-performing loans are relatively stable over the medium term, with M2 monetary supply continuing to expand.
“Investors’ concern surrounding the impact of alleged impropriety tied to 1Malaysia Development Bhd in the financial sector appears to be overdone, as stated by Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz, who early this year stated that no single entity would have a systemic implication to the overall financial system of the local economy.”
From an economic standpoint, Hanifah said Malaysia was currently at the crossroads.
“Investor sentiment has been very negative or fleeting at best, while investment specialists and other global observers offer differing views on the country’s direction. Numerous uncertainties as mentioned above further obscure clarity of rational and fair analysis of the country’s economic landscape.
“However, a lack of clear consensus on future events is common in the analysis of any country at any given time. This truism, we believe, reinforces the importance of leveraging the expertise and resources of on-the-ground local market specialists who can look past news headlines and concentrate on important economic fundamentals and proprietary analytical processes that can reveal information others may miss.”
According to Hanifah, the analysis on Malaysia is based on six main factors, namely, political stability, economic activity, the external sector, the monetary sector, fiscal balance and debt dynamics.
“We apply various weightings to these factors, with economic activity and the monetary sector being the largest. This is part of the quantitative side of our research and analysis, and if our results yield the opinion that a given country’s dynamics are weaker than widely published indicators, our outlook would be reflected accordingly,” said Hanifah.