STORMY SKIES AHEAD FOR MALAYSIA: ECONOMISTS MAKE DIRE FORECAST FOR SEVERAL SECTORS

PETALING JAYA – An economist has warned that the media, retail, and finance industries may be among those that will bear the brunt of an economic slowdown expected next year.

Yeah Kim Leng, a professor of economics at Sunway University, said companies in such sectors were likely to face the worst types of disruption in the face of digitalisation and would need to restructure their business models to survive.

Yeah Kim Leng.

 

 

 

 

“Those who resist change and those who do not improve and upgrade their skills will not survive,” he told FMT.

He noted that the media industry was already suffering but said the worst might be yet to come as companies cut their spending on advertising.

“Media companies will need to know their target markets, look at Google Analytics, venture into technology to reach more readers and ensure improvement in their employees’ skills,” he said.

Yeah spoke of the retail sector as facing one of its most challenging periods in history. The only way retailers could survive, he said, would be by going into e-commerce.

Referring to banks, he said those that were not embracing financial technology might see their growth stunted.

He mentioned the hotel and property sectors as also being under threat.

However, macro analyst Hoo Ke Ping said he believed the property sector would not crash although it might face a slowing down of business due to uncertainties in the job market.

“The saving grace here is the low interest rate,” he said. “As long as their monthly costs do not go up, house buyers will continue to service their loans.”

But he agreed that the hotel sector might suffer, saying it was likely that occupancy rates would drop with a reduction in the number of tourists.

“People from China, Taiwan, India, Japan and Europe may not be doing much travel due to the economy,” he said.

Hoo Ke Ping.

Hoo made a positive forecast for exports to the US, saying the expected resilience of the US economy would ensure customers in that country would continue to buy from Malaysia.

A former World Bank economist, Lim Teck Ghee, noted that the Asian Development Bank and the World Bank had forecast that Malaysia would maintain its GDP growth at between 4.5% and 4.6% this year and next year.

Lim Teck Ghee.
However, he cautioned against wild cards in internal and external factors, such as the worsening of the US-China trade conflict, which he said would have adverse effects on global and regional markets.“I am not so optimistic that we can be a beneficiary from the ripple effects of this conflict as other observers have been quick to predict,” he said.

Lim also said business and investor confidence would depend on the political situation and the fallout from racial and religious tensions.

“The Zakir Naik issue, for example, if unresolved will damage our business ties with India, which is among our biggest export markets,” he added.

He criticised the government for its alleged unwillingness to “bite the bullet on the key actions necessary to reform the civil service”, saying this might have an effect on the economy.

Guan Eng confident economy will remain resilient in 2020

KUALA LUMPUR: The Malaysian economy is expected to remain resilient in the coming year, led by favourable domestic demand, said Finance Minister Lim Guan Eng.

He said underpinned by the Budget measures, policies are in place to spur economic activities which are crucial in supporting Malaysia’s growth target and ensuring the country’s markets remain vibrant and attractive in a rapidly-evolving region.

“Fundraising in the capital market is expected to remain robust, driven by various strategic projects.

“Therefore, the investment banking industry can expect to play a more prominent role focusing on key activities, especially in capital raising, project financing and investment management.

“The government is committed to providing a conducive environment for the private sector to take the lead in generating economic activities and looks towards the financial sector to continue to be the enabler of growth, facilitating the nation’s transformation,” he said at the 40th Malaysian Investment Banking Association (MIBA) annual dinner here tonight.

He said while the nature of the challenges faced by investment banks today is increasingly complex, MIBA members should further strengthen their capabilities to remain competitive and keep pace with changing needs in order to be able to capitalise on new opportunities that emerge.

Boosting Islamic finance

On another matter, the minister said Malaysia continues to pursue Islamic finance in the domestic financial market as well as internationally, and remains a leader in the sukuk market accounting for 50.4% of global sukuk outstanding at the end of last year.

He said to further promote the Islamic finance ecosystem and position Malaysia as the centre of excellence for Islamic finance, the finance ministry has set up a special committee to look into formulating an Islamic Economic Blueprint and develop a deeper understanding of Islamic finance.

According to Lim, the Malaysian capital market has demonstrated long-term resilience in its growth despite the global environment which has allowed the capital market to remain a key source of financing for the real economy.

“As at September 2019, the size of the Malaysian capital market has expanded to RM3.2 trillion. This development certainly bodes well for our country.

“Today, traditional finance institutions are facing increasing competition with the rapid expansion and application of financial technology, which is changing the landscape of the financial markets around the world.

“The government and financial regulators are proactively responding to this emerging trend and exploring ways to facilitate innovation and to modernise the financial sector, while ensuring that necessary safeguards are in place,” he said.

Lim said it is important that industry participants practise good business ethics, promote accountability and transparency to preserve the integrity of Malaysia’s financial market.

“In this regard, I am pleased to note MIBA members’ significant role as financial intermediaries in the green financing ecosystem, facilitating issuances of green bonds and sukuk.

“Malaysia saw the issuance of the world’s first green sukuk for solar power plant in July 2017, and thereafter several more notable issuances followed suit.

“The growth potential of the green economy in Malaysia is enormous with large untapped opportunities.

“Financial intermediaries can play a catalysing role in the development of this sector and support the government’s transformation efforts towards a more sustainable and green economy,” he added.

– FMT

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