THE economy may be facing intense challenges but it is certainly not going to crash this year as some fear, said Ong Kian Ming.

The deputy international trade and industry minister said the economy may be slowing but a recession is not on the horizon.

A rising trend in trade figures, including in manufacturing sales, and growth in employment show the economy is able to overcome challenges driven by internal and external factors.

“There seems to have been an increase in the number of opinion pieces and articles prognosticating a gloomy future for the Malaysian economy in 2019.

“While there are certainly economic challenges ahead driven by internal and external factors, the perception that the Malaysian economy will somehow crash and burn in 2019 is most certainly a false one,” he said in a statement.

“It is important to remember not to panic without understanding the underlying numbers. A recession is nowhere on the horizon for the Malaysian economy.”

A survey found that Malaysia’s manufacturing sector had plunged to its lowest level since 2012, with the Nikkei Purchasing Managers’ Index (PMI) dropping to 46.8 in December from 48.2 in the previous month. 

A figure above 50 shows managers are increasing their orders and economic output and a figure below 50 shows managers are depleting their existing stocks and not expecting to increase their future economic activity.

While admitting that the PMI data was an important indicator of economic activity in the manufacturing sector, Ong said the fall in the PMI in the first half of 2018 did not lead to a significant decrease in manufacturing output and value in the Malaysia economy.

“Indeed, the overall trend in the value of manufacturing sales in Malaysia showed a healthy increase from RM67.8 billion in January 2018 to RM73.1 billion in October 2018, which is an increase of 7.8%.”

He pointed out that employment also continued to grow steadily from 14.67 million in January to 14.94 million in October, showing an increase of 1.8%, while unemployment remained stable at 3.3% during the same period.  

As for trade figures, Ong said these also continued to show an increasing trend in 2018 compared with 2017. He said the total trade for each month in 2018 was higher than the corresponding month in 2017, with the exception of February. 

“Total trade from January to November 2018 has increased to RM1.72 trillion from RM1.62 trillion over the same period in 2017, an increase of 6.2%.

“This is higher than the initial target of 5.0% growth set in early 2018.”

The DAP MP for Bangi, who is an economist by training, said the Nikkei survey is a business survey and its correlation with actual output may be weak, adding that there were other similar surveys which showed a more positive Malaysian outlook for 2019.

He conceded that a slowdown in manufacturing growth may be imminent but the degree of the slowdown should be manageable.

“Most importantly, the figures do not show that Malaysia is heading towards a contraction in economic output anytime soon.”

And while the World Bank’s downward revision of its 2018 growth forecast for Malaysia from 5.4% to 4.9% is not good news, he said, it was nothing to panic over.

“Before we panic and make a hue and cry about this downward revision, we should try to understand the underlying factors involved.

“Bank Negara had already revised GDP growth for 2018 to 5% earlier in August 2018, down from a forecast of 5.5% to 6%.

“The main reasons for this revision was the weakness in the commodity (notably palm oil) as well as mining sectors. Both these sectors experienced reductions in output in the second quarter of 2018. This trend continued in the third quarter of 2018.

“It is important to note that the GDP figures for the manufacturing and services sector, which comprises almost 80% of the economy, are still registering healthy growth in all three quarters of 2018.”

He said there were challenges ahead for the Malaysian economy in 2019, with global growth projections being cut from 3.7% to 3.5% amidst global uncertainties including interest rate hikes, political uncertainties in major economies and the possibility of further escalation of tensions in the US-China relationship. 

He said given Malaysia’s exposure to the global economy, there is no doubt it will be negatively affected by some of the global headwinds.

“But  it is a far cry from the fear that Malaysia is about to enter into a recession.” – January 6, 2019.