Malaysia's economy likely lost momentum in first quarter, trade risks weigh
BENGALURU, May 14 (Reuters) - Malaysia's economy likely grew at its slowest pace in a year in the first quarter, losing momentum due to weakened household consumption and exports, according to a Reuters poll of economists.
Advance, opens new tab estimates showed that key sectors, including services and manufacturing, expanded more slowly than in the previous quarter as consumers tightened spending and export momentum faded amid U.S.- China trade tensions.
Southeast Asia's third-largest economy expanded 4.5% in the first three months of the year compared to the prior-year period, according to the May 8-13 poll of 21 economists, in line with a preliminary estimate released in April.
The economy grew 5% in the fourth quarter.
"The higher frequency data such as retail sales, car sales, loan growth and imports of consumer goods are moderating relative to Q4 2024. This is an indication that consumption is likely to be on the softer side," said Ahmad Nazmi Idrus, head of economics at CGS International Securities.
Maintaining growth momentum this year would be difficult due to uncertainty from the global trade war, he said.
In April, economists lowered Malaysia's 2025 consensus growth forecast to 4.3% from 4.7% earlier in the year, citing trade tensions and weaker domestic consumption, while the International Monetary Fund (IMF) has cut its forecast to 4.1%.
Malaysia faces a duty of 24% on exports to the United States starting in July unless a bilateral deal is reached.
Prime Minister Anwar Ibrahim said this month the U.S. government had agreed to further negotiations, but the economy was unlikely to meet its 4.5%–5.5% 2025 growth target due to the trade war.
The U.S. and China - Malaysia's two major trading partners - agreed a temporary 90-day truce on tariffs this week, but risks to economic growth remain.
In response to a weaker outlook, Bank Negara Malaysia (BNM) has announced a reduction to the statutory reserve requirement (SRR) ratio of 100 basis points to 1.00%, effective Friday, which will inject roughly 19 billion ringgit ($4.4 billion) into the banking system.
Economists have also adjusted their outlook on interest rates, now forecasting one rate cut in 2025 in a Reuters poll, from an earlier projection that rates would remain flat at 3% this year.
"Escalating...trade tensions under a second Donald Trump administration, which have resulted in higher and more widespread U.S. tariffs than those imposed during his first term, could prompt BNM to ease monetary policy more," DBS economist Chua Han Teng, said.
($1 = 4.3150 ringgit)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
5 hours ago
- Reuters
US-loaded ethane vessel heads to India after China export curbs
HOUSTON, June 11 (Reuters) - An ethane tanker that loaded in the United States headed to India on Wednesday, ship tracking data showed, after Washington required U.S. exporters to seek licenses to ship the shale gas to top buyer China. Around half of all U.S. ethane exports head to China, where it is used by the petrochemical industry. The vessel's change in destination underscores how the fallout from trade tensions between the United States and China is shifting ethane flows. Liberia-flagged STL Qianjiang, which loaded at Energy Transfer's (ET.N), opens new tab Nederland terminal for China's Satellite Chemical ( opens new tab, signaled Dahej, a port on the West Coast of India, as its destination, according to LSEG and Kpler ship tracking data. The final buyer of the cargo is India's Reliance Industries ( opens new tab, Kpler data showed, citing the vessel's bill of lading. The ship has traversed only between the United States and Satellite Chemical's Lianyungang petrochemical facility since July 2022, according to historic data on Kpler. Energy Transfer, Satellite Chemical and Reliance did not immediately reply to a request for a comment. Energy Transfer and Enterprise Products Partners (EPD.N), opens new tab, two of the top U.S. ethane producers and exporters, said they have received letters from the U.S. Commerce Department requiring the companies to apply for a license to ship ethane to China. Enterprise said it also received a notice from the U.S. government of its intent to deny emergency requests for three proposed export cargoes of ethane totaling around 2.2 million barrels to China. Chinese petrochemical firms use ethane as a feedstock because it is a cheaper alternative than naphtha, while U.S. oil and gas producers need China to buy their natural gas liquids as domestic supply exceeds demand.
Reuters
5 hours ago
- Reuters
IMF, Serbia reach staff-level agreement on 36-month deal
BELGRADE, June 11 (Reuters) - The International Monetary Fund (IMF) and Serbia have reached staff-level agreement on the first review under a 36-month arrangement to help support economic reforms, the fund said in a statement on Wednesday. The so-called Policy Coordination Instrument (PCI) was signed in October to make it easier for the Balkan country to secure lending from other sources. Under the arrangement, Serbian authorities are committed to a fiscal deficit limit of 3% of gross domestic product over three years. The review will be subject to approval by the IMF Executive Board, the fund said in the statement which was issued after its two-week trip to Serbia. It also warned that downside risks for the economy were elevated. The IMF said political tensions over anti-government protests and blockades of state universities launched last November "may weigh on confidence". Serbia has seen months of anti-government rallies after 16 deaths from a railway station roof collapse triggered accusations of widespread corruption and negligence. The IMF warned that a global growth slowdown and increasing "geoeconomic fragmentation could negatively affect exports and foreign direct investment". However, it expects Serbia's economy to grow 3% this year and 4% in 2026. "Serbia has built up substantial buffers to respond to shocks — foreign exchange reserves and government deposits are high, public debt is declining, and banks are well-capitalised and liquid," the IMF said.
Reuters
7 hours ago
- Reuters
Hopes for Fed rate cuts keep US Treasury yield views low ahead of supply deluge
BENGALURU, June 11 (Reuters) - U.S. Treasury yields are set to decline further according to bond strategists who are clinging to expectations the Federal Reserve resumes cutting interest rates after pausing for more than half a year even as dealers are set to underwrite a deluge of new supply. A slight majority now expect another sell-off in longer-dated bonds, the maturities most at risk, by the end of this month. Concerns that President Donald Trump's tax-cut and spending bill will add trillions of dollars to an already-staggering $36.2 trillion debt pile by 2034, along with tariff brinkmanship already have many holders of U.S. assets scrambling for the exit. The rising "term premium" – what investors demand as compensation for holding longer-dated debt – leaves the market more vulnerable, particularly among foreign investors, ahead of upcoming Treasury bond auctions. "The amount of debt we need to issue keeps rising and there doesn't appear to be anyone in Washington on either side that really has a plan to bring down deficits and address our fiscal situation," said Collin Martin, fixed income strategist, Schwab Center for Financial Research. "That'll weigh on the long end of the curve where we need to see yields rise a bit to attract that marginal buyer." Global sovereign bond yields have mostly risen in tandem over the past two months. A rapid sell-off in benchmark U.S. 10-year Treasuries in April pushed the yield up around 60 basis points. That yield, which rises when prices fall, has since steadied, oscillating around 4.50%. Median forecasts from nearly 50 bond strategists in a June 6-11 Reuters survey, most from dealers and sell-side firms, predicted the 10-year yield would decline a modest 13 bps to 4.35% in three months and to 4.29% in six from its current 4.48%. Despite predicting a decline, more than half upgraded their forecasts from a May survey with many flagging the risk of yields moving higher. "The 10-year will probably trade range-bound for a while between 4-4.50% and maybe even rise a little bit further, particularly given deficit concerns. The yield curve should continue to steepen as short-term yields drift gradually lower as the Fed cuts rates one or two more times by year-end," Schwab's Martin added. The more interest rate-sensitive 2-year yield was forecast to decline a slightly steeper 17 bps to 3.85% in three months and to 3.73% by end-November, the survey showed. Most economists polled by Reuters predict two or fewer rate cuts this year while rate futures are currently pricing two. An ongoing auction for three-year Treasury notes has been met with somewhat tepid demand though markets will be paying closer attention to sales of longer-dated 10- and 30-year bonds this week. "Given recent market behavior and the pressure we've seen on yields, it seems the long end of the yield curve is most susceptible to a supply-demand imbalance leading to higher rates," said Mark Heppenstall, chief investment officer at Penn Mutual Asset Management. "There has been some disruption at the long end of the curve and the 30-year Treasury bond supply is the biggest question mark for the week in light of all the supply that is hitting. But that isn't to say threes and 10s are going to be necessarily easy either." A Reuters survey of foreign exchange strategists conducted last week showed a near-90% majority expecting a decline in demand for dollar-denominated assets this year with Europe widely slated to be the biggest beneficiary. "On the bond side European investors who are looking at the U.S. market would normally hedge currency risk, but that's become very expensive. So on a hedged basis, Treasuries are just not very attractive to European investors anymore," said Chris Iggo, CIO of AXA IM Core, AXA Investment Managers. "There's been a lot of talk about defence spending and infrastructure but you know 'Show me the money!' - we haven't really seen the opportunity set increased massively just yet."
