Latest news with #MARCRatingsBhd
New Straits Times
8 hours ago
- Business
- New Straits Times
MARC: Inflation to stay manageable despite SST hike
KUALA LUMPUR: MARC Ratings Bhd expects Malaysia's inflation to remain manageable despite the recent upward revision to the sales and service tax (SST). MARC's chief economist Dr Ray Choy said the global monetary policy environment has turned more dovish, with Bank Negara Malaysia cutting its overnight policy rate to 2.75 per cent in July, following the European Central Bank's easing cycle in 2024. "Markets are also pricing in two interest rate cuts by the US Federal Reserve by the end of 2025," he said at MARC's recent forum, An Afternoon Talk with MARC: Global Economic & Market Outlook, Geopolitics and Tariff Agendas. On the domestic outlook, Choy said Malaysia's economy is projected to grow by 4.4 per cent in 2025, supported by resilient domestic demand, including private consumption, investment activity and a sustained recovery in tourism. He added that the Malaysian bond market remains steady, backed by robust foreign demand for government securities and a positive medium-term growth trajectory. Commenting on trade trends, Choy noted that the average US tariff rate since 1989 has been around 2.7 per cent, but ongoing trade tensions could push this higher, likely settling in the teens. "As of 10 July 2025, data shows that the Trump administration reduced initial tariff rates on 59.1 per cent of its trading partners, with average tariff increases of 1.5 per cent and reductions of 7.3 per cent. This reflects a complex recalibration of trade policy and hope for better outcomes on future negotiations," he said. Meanwhile, Malaysian Rating Corporation Bhd (MARC) group chief executive officer Arshad Mohamed Ismail said that the line between economics and geopolitics is becoming increasingly blurred, posing significant implications for global business strategies, policy decisions and financial stability. He said that the convergence of economic and geopolitical risks is now more evident than ever, with tariffs being used as strategic levers in US foreign policy and disruptions in global energy markets continuing to impact supply chains around the world. Arshad added that US tariffs have shifted beyond their traditional economic purpose and now reflect broader political and strategic priorities. "For corporations and financial institutions, understanding and navigating this complexity is vital for sound planning and risk management," he said. Arshad said that for open economies like Malaysia, the current global climate demands a more agile and multidimensional approach to competitiveness.
Malaysian Reserve
a day ago
- Business
- Malaysian Reserve
Johor debt levels low, disciplined fiscal management, says MARC
JOHOR has been assigned an unsolicited sub-sovereign credit rating of AAA with a stable outlook, reflecting the state's resilient and expanding economy, persistent fiscal surpluses, exceptionally low debt levels and stable political environment that underpins its long-term development trajectory. In a note released today, MARC Ratings Bhd said in terms of fiscal management, Johor's debt levels are among the lowest in Malaysia, having remained at a low level of 0.1% of GDP from 2021 to 2023, supported by disciplined fiscal management and a consistently growing tax revenue base. 'Johor has sustained an impressive track record of fiscal surpluses over the past decade, with the sole exception of a deficit recorded in 2021 due to pandemic-related revenue shortfalls,' it said. It said the 'prudent' fiscal management has enabled the state to accumulate substantial reserves, which reached RM2.4 billion in 2023, up from RM1.8 billion in 2013. Nonetheless, it said the state has consistently maintained a high level of development expenditure, allocating 39.4% of its total expenditure towards development between 2019 and 2023. It noted that Johor holds a significant position in Malaysia's economy, contributing RM148.2 billion or 9.5% to the national real gross domestic product (GDP) in 2023. 'This strength is anchored by a robust services sector, which accounts for 54% of its GDP, alongside the country's largest agricultural sector, contributing nearly a fifth of national agricultural output,' it said. It added that the state's strategic proximity to Singapore has generated substantial economic spillovers, particularly in the retail, hospitality, and investment sectors, reinforcing Johor's economic momentum. The upcoming Johor-Singapore Special Economic Zone (JS-SEZ), with its ambitious development agenda, is expected to catalyse higher level growth by attracting high-value industries. While Johor's revenue structure is robust, it said the state could further benefit from strategies aimed at expanding its diversification as it remains reliant on traditional sources such as quit rent and land title premiums. As such, it said the state has introduced several revenue-enhancing measures for 2025 to build additional fiscal buffers to support long-term fiscal sustainability. The consolidated funds-to-expenditure ratio, while having moderated to 143.3% (2019–2023) from 174.5% (2014–2018), still reflects strong liquidity and financial flexibility. 'Furthermore, Johor benefits from strong and consistent political representation. Historically, Johor's political stability has been notably characterised by the longstanding dominance of the Barisan Nasional (BN) coalition, which has successfully secured the majority in all but one state election. 'The current alignment with the federal Unity Government enhances policy coordination and facilitates the implementation of national economic blueprints at the state level,' it said. — TMR
The Star
05-05-2025
- Business
- The Star
Domestic demand steadies growth
PETALING JAYA: Malaysia's economic growth for the first quarter ended March 31, 2025 (1Q25), is expected to be in line with the recently released advance gross domestic product (GDP) estimate of 4.4%. Most economists whom StarBiz spoke to had GDP projections that aligned with the advance estimate, noting that domestic demand likely anchored growth in 1Q25 amid trade tensions and uncertainties. Bank Negara is set to release the preliminary 1Q25 GDP data on May 16, which is expected to show a moderation in growth from 5% in 4Q24. The government's growth projection of 4.5% to 5.5% for the year may be revised given the recent developments. MARC Ratings Bhd chief economist Ray Choy MARC Ratings Bhd chief economist Ray Choy expects GDP growth to be in the region of 4.5%. He said the main drag would come from the mining and quarrying sector, caused by a decline in oil and gas revenues and a high base effect from 1Q24. However, Choy said consumer demand would likely remain supportive of growth, mainly due to the increase in civil servants' salaries, the rise in minimum wages and stable employment conditions. He noted that demand from wholesale and retail trade during the festive season in 1Q25 is expected to help drive growth. 'Growth in the construction sector and the electrical and electronics sector was likely healthy in the said quarter due to ongoing transport infrastructure upgrades and various urban renewal projects, alongside healthy demand for semiconductors,' he said. Choy has projected an annual GDP growth of 4.4% this year, cautioning that domestic demand may slow due to external uncertainties stemming from US tariffs and the effects of the trade war on global demand. 'Financial market volatility will also affect consumer sentiment and cause some wealth destruction. 'However, domestic demand growth will likely remain above 5%, premised on increases in civil servants' salaries, higher minimum wages and stable employment conditions. 'Typically, consumer demand growth does not fluctuate drastically compared to other sectors, such as manufacturing investments and construction,' he added. RAM Rating Services Bhd senior economist and head of economic research Woon Khai Jhek RAM Rating Services Bhd senior economist Woon Khai Jhek said the GDP deceleration for 1Q25 was within the rating agency's expectations. 'One of the key factors for the deceleration was the mining sector. 'This is to be expected amid a natural gas production facility shutdown in Sarawak in 1Q25, which resulted in a 6% contraction in the Industrial Production Index (IPI) for the mining sector during the January to February 2025 period. 'Hence, the sharp 4.9% contraction in mining output, as indicated by the advance estimates for 1Q25 (4Q24: 0.9%), (and) its drag on overall GDP growth comes as no surprise,' he said. Woon said the anticipated slowdown in the services sector also dragged overall growth lower. The advance estimates put services growth at 5.2% in 1Q25, easing from 5.5% in 4Q24. 'We had expected it in anticipation of a continued moderation in wholesale and retail trade activities, which averaged 3.9% in January to February 2025 (4Q24: 4.4%). 'There was also some anticipated drag from electricity generation, as the IPI for electricity contracted by 1.5% in January-February 2025 (4Q24: 3.1%),' he said. Drilling down further on domestic demand, Woon said public and private investments are expected to drive growth through the continued rollout of multi-year infrastructure projects and greater realisation of approved investments. These factors are expected to provide the necessary support and buoy Malaysia's overall GDP growth this year, he added, noting that the rating agency has revised its annual GDP forecast to between 3.5% and 4.5%, down from 4% to 5%. He said much of the year's outlook depends on tariff negotiations, counterbalance measures and regional trade initiatives that could materialise in the near to medium term. Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the 1Q25 advance estimate growth was within the bank's expectations for a moderate start to the year. He said despite the boost from the festive seasons of Chinese New Year and Hari Raya Aidilfitri, the headline number was somewhat underwhelming. 'Looking ahead, while domestic demand is expected to remain the main growth driver, we anticipate some moderation in 2025. 'We have downgraded our GDP growth forecast to 4.1% for this year, reflecting a softer-than-expected start to the year and increasing downside risks from the external front, including heightened geopolitical tensions and the recent escalation in US tariff measures, which could weigh on exports and investor sentiment. 'Private consumption will likely grow at a more measured pace, while investment will continue to lend support, particularly in infrastructure and manufacturing sectors. 'Overall, we expect domestic demand to grow slightly below its long-term trend, underscoring the need for continued policy support and strategic investments to sustain growth amid a challenging global backdrop,' Mohd Afzanizam said. Sunway University economics prof Yeah Kim Leng Sunway University economics professor Dr Yeah Kim Leng has projected domestic demand growth to be the main anchor of growth for the year, with a forecast range of 4.7% to 5.2% – slower than the 5.3% growth achieved in 2024. Private consumption and investment will be the main drivers of domestic demand in the face of highly uncertain and softening external demand, he said. Yeah pointed to the advance 1Q25 GDP data, which showed that retail trade has held up well, expanding 5.4% in the first two months of the year. 'Internally, the overriding imperative for policymakers is to shield the country from the economic turbulence caused by the ongoing US tariff threats, while continuing to strengthen the competitive foundations of the economy. 'These include expediting investments, diversifying trade, and continuing the reform agenda to improve government administrative efficiency and strengthen the national education and health systems, while engaging with the private sector to raise wages, skills and productivity levels,' Yeah noted. OCBC Senior Asean economist Lavanya Venkateswaran OCBC Bank senior Asean economist Lavanya Venkateswaran said resilient private consumption and a continued focus on infrastructure spending helped support economic growth for Q125. 'We forecast 2025 GDP growth of 4.3% year-on-year (y-o-y) with the risks skewed to the downside. 'The challenges for the Malaysian economy will be the headwinds mainly from the external front, which will likely have a knock-on impact on domestic demand,' she said. HSBC economist Yun Liu HSBC Asean economist Yun Liu said Malaysia's 1Q25 advance GDP growth of 4.4% y-o-y was a small surprise, as it was below the bank's original forecast of 4.9% y-o-y. Trade headwinds are likely to intensify despite the 90-day pause on the Liberation Day tariffs announced April 2. She said besides trade, foreign direct investments would also be affected due to the unprecedented uncertainty, making investors more cautious and adopt a 'wait-and-see' approach. 'That said, there are still green shoots. For one, the trade negotiations are underway as we wait for more clarity on the direction of tariffs after 90 days. 'In addition, Malaysia's trade is also diversified by products and trading partners,' she said. Liu said on a relative basis, Malaysia compares well for domestic resilience relative to its peers, with decent private consumption and public investments expanding at a strong pace. This means the domestic resilience can partially mitigate some external risks. 'We have lowered our 2025 GDP growth (forecast) to 4.2% (from 4.8%) for Malaysia, and we believe this may prompt more policymakers' responses. 'We are now penciling in a 25 basis points rate cut from Bank Negara in July,' Liu said.
New Straits Times
02-05-2025
- Business
- New Straits Times
Tariff tensions trigger RM2.8bil bond inflows in April, says MARC
KUALA LUMPUR: Rising global trade tensions have driven foreign investors toward safer assets, fuelling bond inflows into Malaysia despite persistent equity outflows, according to MARC Ratings Bhd. In its latest monthly review, the ratings agency said foreign investors withdrew RM4.7 billion from equities, but this was offset by RM2.8 billion in net inflows into the bond market. Yields on Malaysian Government Securities declined across the curve, with sharp drops in short- to medium-term tenures reflecting strong demand for bonds amid dovish global monetary expectations and tariff-related uncertainty. MARC said corporate credit spreads widened, signalling a shift in preference toward sovereign and high-grade bonds. Risk appetite in the secondary market also faded. Globally, the US Dollar Index fell below 100 amid concerns over US President Donald Trump's trade policies and expectations of Federal Reserve rate cuts. While US Treasury yields climbed on inflation fears and retaliatory selling, equity markets lost momentum. "Despite maintaining a broadly dovish bias, central banks and global markets are adopting a cautious wait-and-see approach during the current 90-day tariff review, as Trump's policy actions are likely to remain unpredictable," MARC said. Domestically, Malaysia's economy is expected to grow 4.4 per cent in the first quarter of 2025, down from 5.0 per cent in the previous quarter due to weaker mining and manufacturing activity. However, domestic demand, services and construction remained firm. Inflation stayed subdued at 1.4 per cent in March, but MARC flagged upside risks from the recent minimum wage hike and the upcoming RON95 fuel subsidy rationalisation. Exports rose 6.8 per cent in March, driven by electrical and electronics, palm oil and machinery shipments to the US, Hong Kong and Singapore. Despite this, MARC warned that exposure to new US tariffs would pose risks, though countries could mitigate this through ongoing supply chain diversification. The ringgit, which initially weakened after the US tariff announcement, rebounded in April on improved regional sentiment, broader US dollar weakness and a 90-day pause on tariff implementation.
