KUALA LUMPUR: The government’s deferment and cancellation of some infrastructure projects is not necessarily a bad move, UOB Malaysia senior economist Julia Goh said.
It could provide Malaysia with some buffers from global risks, she added.
“It (the cancellation and deferment) is not necessarily a bad thing as there are global risks up ahead and concerns over market volatility.
“With the removal of the projects, we can be more certain of the current account surplus can sustain which will support the country’s economy,” she said at a media briefing here today.
“There are a lot of other infrastructure projects still ongoing. While it may not be as big in value, the quality of projects will enhance the country’s value add which will attract investments into the sector,” Goh added.
Three mega projects have been axed by the government. They are the RM55 billion East Cost Rail Link undertaken by China Communications and Construction Company, as well as a RM9.41 billion Multi-Product Pipeline and the Trans-Sabah Gas Pipeline, which are undertaken by China Petroleum Pipeline Bureau.
Malaysia also agreed with Singapore to delay the Kuala Lumpur-Singapore High-Speed Rail until May 31, 2020.
Goh expects the Malaysian economy to grow positively at 4.8 per cent this year and in 2019, but the ringgit may slide vis-a-vis the US dollar next year.
This would be bogged down by greater external risks arising from global trade disputes and heightened market volatility.
She said the country’s economy would find support from robust domestic private consumption and investments, although it would remain exposed to global headwinds next year.
“Intensifying trade disputes and policy uncertainty may result in slower global growth in 2019. The ongoing US-China trade tensions and the quantum of US Federal Reserve interest rate rises will continue to have an impact on global growth and market volatility.
“There are no signs of US-China trade tension easing as further protectionist trade policies will undoubtedly be negative for global trade, leading to greater risks for export-driven Asian economies including Malaysia.
“Given these developments, we expect the impact of broadening trade measures resulting from the trade tensions will be felt more materially in 2019,” she added.
Goh said the ringgit may slide to 4.22 against the dollar by next year, depending on the strength of the dollar, direction of the renminbi and crude oil prices.
“We find that the the three key factors will determine the ringgit movement. But of course, the role of the domestic policies will have an impact on the performance too, although the dollar, renminbi and crude oil prices will remain the key drivers of its performance.
She said the government's efforts to be more transparent as well as the economy's underlying strengths and steady growth, low unemployment and a surplus current account will help support the ringgit.
“We are projecting one more US interest rate hike in December and three more next year. If the renminbi weeakens further beyond 7.00, the ringgit may slide further beyond 4.22,” she added.
As at 2pm today, the ringgit was traded at 4.1932 against the greenback.
The ringgit hovered between 3.8533 and 4.2005 in the last one year.