-  Maintain GDP projection at 5.3% for 2013. Despite the BN coalition having won with a reduced majority, we are maintaining our full-year estimates at this juncture pending the 1Q13 GDP statistics release on May 15. We believe that both private consumption and investment will continue to benefit from the current economic policies.

-  ETP to facilitate growth. The long-term annual growth target for GDP of 5-6% is achievable provided that the focus remains on sustaining growth momentum, facilitated by the economic transformation plan. The accommodative expansion under the long-term private-driven initiatives of the ETP augurs well for domestic growth in 2013.

-  Money supply and total loans moderated in 1Q13. In tandem with the softer loans growth and weak economic sentiment prior to the 13th GE, broad money (M3) had advanced at a moderate pace of 8.9% YoY (or +3.3% QoQ) in 1Q13 (4Q12: +10.8%). Extension of credit to the private sector had slowed in 1Q13 following a boost in money supply during 4Q12.

-  GDP grew at a moderate pace of 4.8% in 2008. As a recap, the BN coalition won by a reduced majority of 63.1% in 2008 general election (vs. 90.4% in 2004). That year, the GDP grew at a moderate pace of 4.8% (2007: +6.3%). However, note that the pull-back in growth in2008 was further exacerbated by the global economic recession and housing bubble crisis in the US.

-  Investment outlays to persist. Malaysia has relied extensively on the boost in investment since the roll-out of the ETP. Investment outlays will remain supportive of growth albeit at a slower pace this year. Unlike the robust double digit growth rate of 19.9% in terms of total investments last year, we anticipate a moderate investment growth of 14.8% for 2013.

-  Sound fiscal management. The government will ensure the sustainability of public finances with discretion in terms of spending coupled with a boost in revenue. In tandem with the consolidations ahead, a strong emphasis will be on ensuring the efficient allocation of government spending in order to achieve the inclusiveness of growth.

-  Rationalisation of subsidies. Aside from that, we do expect one round of subsidy cuts in 2H13 which could result in higher prices of goods. Based on previous guidance, we have priced-in the rationalisation of subsidies into our full-year assumption for inflation.

-  Towards a developed economy by 2020. Malaysia is on a steady growth trajectory towards a developed economy by 2020. By 2020, per capita income is expected to reach USD15,000. Malaysia saw its GNI per capita increased by a cumulative 49% from 2009 to USD9,970 (RM30,239) as at the end of last year.

-  Economic challenges. Amid global headwinds, the downside risk stemming from the lacklustre trade activities is likely to persist. On the local scene, however, we do expect fiscal consolidation efforts post-election. Aside from that, other unanticipated slowdown or delays in development projects could lead to a slower growth momentum during 2H13. Drags on domestic demand could arise due to the weaker-than-expected economic sentiment on the local front.

Source: AmeSecurities