"Malaysia’s debt ratio is relatively low. In Singapore, it is 130%. And although the deficit ratio has risen recently, it is still manageable. If GDP rises faster than the debt level, then the ratios will fall, and provided the financing costs can be paid, there is no particular risk to fiscal stability,” says Malaysia University of Science and Technology economics professor Geoffrey Williams. — Bloomberg
Early GDP readings in focus
THE advance estimate for Malaysia’s second-quarter (2Q) economic data will be announced on Friday.
UOB Global Economics & Markets Research estimated the gross domestic product (GDP) in 2Q to expand 4.6% year-on-year (y-o-y) from 4.2% y-o-y in 1Q.
The research house projects real GDP growth to improve further on the back of year-ago low base effects, increasing tourism activities, continued investment flows, recovering external trade activities and withdrawals from the Employees Provident Fund Account 3 amid the ongoing implementation of various initiatives under the national master plans and budget.
According to Trading Economics’ global macro models and analysts’ expectations, the GDP annual growth rate in Malaysia is expected to be 3.50%.
China growth figures
A slew of data is due from China including 2Q GDP, June industrial production, retail sales, new home prices, M2 money supply and new yuan loans.
China will also hold its third plenum on July 15-18 and will be watched closely for new economic policies.
UOB said markets will be on the lookout for fiscal and tax reforms, strategies to counter increasing protectionism from the United States and the European Union, promotion of the domestic private sector and housing market development.
Bloomberg estimates 2Q GDP to grow 5% y-o-y from 5.3% y-o-y, with June’s industrial production to grow 4.8% y-o-y from 5.6% in May.
Meanwhile, the People’s Bank of China will also set its one-year medium-term lending facility rate today morning, with markets expecting it to remain at 2.5%.
Bank Indonesia decision
BASED on the latest Bloomberg survey, all 13 economists expect another pause from Bank Indonesia (BI) at 6.25%.
UOB expects the central bank to maintain its BI rate at 6.25% at its July meeting as uncertainty remains high amid BI’s efforts to stabilise the rupiah.
ING does not expect BI to change rates at the upcoming meeting. However, BI governor Perry Warjiyo suggests that there may be room for a policy rate cut in the fourth quarter if the rupiah stabilises.
