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KUALA LUMPUR (BLOOMBERG) – Malaysian Finance Minister Lim Guan Eng has reduced economic growth forecasts for this year to about 5 percent as the export-dependent nation prepares for the effects of a war brewing business.
"If the global economy slows down, as a trading nation, Malaysia will certainly be affected," Lim said in an interview with Haslinda Amin of Bloomberg Television on Thursday in Putrajaya. Its forecasts are more bearish than those of most economists and lower than the projection of 5.5% to 6% of the central bank.
Almost two months in power, Lim, 57, is at the head of Prime Minister Mahathir Mohamad's program. public debt, limit spending and fight corruption. It must do so with lower revenues after the abolition of a 6% consumer tax and in the context of increasing global risks as trade tensions between the US and China rise. And are stepping up and investors are fleeing emerging markets. on the same keel, there are also opportunities for us, "said Lim." Not only as a transshipment point, but also as a neutral country in this dispute, which allows Chinese and US companies to do business with them. " invest and export their products. "
The trade has supported the expansion of Malaysia since last year, boosting the growth rate to 5.9% in 2017. Singapore , China and the United States are its main trading partners.
Debt Burden
Former Chief Minister of the State of Penang, Lim oversees the new government's austerity campaign. is struggling with more than RMB 1 trillion of debt and liabilities, which has been compounded by state guarantees for state-owned enterprises, including the 1MDB scandal. 19659002] "Sometimes this n & # 39; "Is not the debt that haunts you, it's your ability to repay," he said, adding as long as its goal was to reduce the burden in nominal terms and in proportion to GDP.
The priority is to reach a budget deficit target of 2.8% of GDP for this year, while a balanced budget will not be achieved anytime soon. Former Prime Minister Najib Razak had planned to fill the deficit in 2022 or 2023, missing his previous term of 2020.
Currency Value Despite the debt burden, Lim inherits a fairly stable currency and of moderate inflation. Consumer prices rose 0.8% in June compared with last year, the lowest in more than three years, while the ringgit was down 0.5% from last year. to the dollar this year, a better performance than most of his peers. agreed with Mahathir that the fair value of the ringgit was around 3.8 for a dollar, which is 7 percent stronger than its current level, and the same as the Mahathir anchor set in 1998 during the Asian financial crisis .
thinks the market has probably underestimated the strength of the ringgit, but we want to let the market decide, "said Lim. "The fact that many investors have a second look, or consider Malaysia as an investment destination, shows that they are interested in our focus on transparency."
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