CEO Morning Brief

Risks to Economic Growth Tilt More to Downside as Trump 2.0 Uncertainties Loom, Says Maybank IB

edgeinvest
Publish date: Wed, 15 Jan 2025, 09:54 AM
edgeinvest
0 28,330
TheEdge CEO Morning Brief

KUALA LUMPUR (Jan 14): Risks to Malaysia’s economic growth outlook are skewed to the downside, driven by concerns over potential challenges arising from uncertainties surrounding the incoming Donald Trump administration’s policies and the direction of the US Federal Reserve's monetary policy.

“As far as 4.9% GDP (gross domestic product) growth for this year that we are forecasting, I think at this point in time, the risk probably tilts more to the downside rather than the upside,” Maybank Investment Banking Group chief economist Suhaimi Ilias said at the 2025 market outlook briefing here on Tuesday (Jan 14).

“I admit we are more concerned about the downside risks to growth, depending on the implications of Trump's policies for global trade as well as the US Fed's interest rate path,” he explained.

The upside potential would hinge on unexpected positive developments, such as less severe impacts from US trade and tariff policies under Trump’s administration, he said.

Inflation to reach 3%

Meanwhile, Malaysia’s inflation is expected to trend higher at 3% this year, from an estimated below 2% last year, according to Suhaimi.

Suhaimi pointed out that while fuel rationalisation on RON95 with potential two-tier pricing being implemented could add 0.3 percentage points to inflation, the main drivers are elsewhere.

“The RON95 contribution to the CPI (consumer price index) basket is 5%. If the government just simply floated the price of RON95, we estimate that there would be (another) two percentage points added to inflation from where we are now, which is just under 2%, he explained.

“So we can see the drastically different impact on inflation between simply having a one-tier price of RON95, which is the market price, and a two-tier price for RON95," he said. The current RON95 was capped at RM2.05 per litre since 2021.

Among the key factors driving inflation are the increase in labour costs due to budget measures, including the minimum wage hike, the multi-tier levy on foreign workers, and the requirement for foreign workers to contribute to the Employees Provident Fund (EPF), which will add upward pressure on prices.

Additionally, reports on Tenaga Nasional Bhd could raise its base rate by 14% in the second half of 2025, which would further contribute to inflation growth, he noted.

With the government implementing two-tier pricing for RON95, it will limit the upside for inflation. Suhaimi also expects the Bank Negara Malaysia to maintain its overnight policy rate at 3% throughout 2025.

Source: TheEdge - 15 Jan 2025

Related Stocks
Market Buzz
Discussions
Be the first to like this. Showing 0 of 0 comments

Post a Comment