According to THE STAR business and economy news, it is said that Malaysia could be one of the top-three countries in Asia which would be negatively affected by the trade war between United State and China if the condition of war continuing to be worst, based on Standard Chartered. Edward Lee, the chief economist for Asean and South Asia bank urged that the trade war between these two countries could further weaken Malaysia’s economic performance since Malaysia trades a lot with both of these countries which help to accelerate the economy of Malaysia but now it already been moderating in these past few months.
In this case, the gross domestic product (GDP) of our country has decreased lower than the expected percentage of 4.9% in the first half year of 2018. This happened due to supply-side destruction other than the technical “high base” effect. Edward Lee also said that if US goes ahead with 25% tariff on the next US$200 billion Chinese imports and someone added in the previous 25% on US$50 billion worth of imports from China, the possible effect on China’s growth could be 0.
6% of points which is massive. This could be 0.3% points impact on Malaysia’s GDP growth.
GDP is important as it shows how well is the economic of the country performing. The real GDP rate is used to indicate the general health of the economy. It means that the economy of a country is doing well if the real GDP is increasing. However, a slight decrease in GDP can affect customers’ purchasing power and spending patterns and it will cause negative affect of a business.
If the result of real GDP decreases and shift in demand, interest will increase, as well as government spending and other factors.
For the second half year of 2018, he did not discount a possibly moderate growing for Malaysia, given the rising external headwinds, investment and government spending and negative trade sentiment. Keeping in view that the main risks facing by domestic economy, Standard Chartered has reduced its economic growth for Malaysia in the year 2018 from the earlier forecast of 5.3% to 4.8%.
On the other hand, Standard Chartered foreign exchange strategist for Asean and South Asia Divya Devesh expects that local currency will trade RM4 per US dollar by the end of 2018. He stated that ringgit is one of the undervalued currency based on Standard Charteed’s in-house model for currency valuation. He also said that ringgit will continue to attract from a valuation standpoint for foreign investors. Ringgit has clearly outperformed its peers in Asia and more broadly in the emerging markets. Lastly, he said that the performance would continue. It is expected that ringgit would be trade at RM4.10 against the greenback in end of 2019.
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