Fitch Solutions Forecasts Trivial Contribution Of Infrastructure Projects To Malaysia

As with other analytics agencies, Fitch Solutions Macro Research retained its 4.2 percent forecast of the Malaysian economy’s 2019 economic growth. Researchers said not even this year’s construction drive will have a significant impact on the local economy.

Based on the latest data obtained by Fitch Solutions, the research team predicted that construction projects this year will have a “positive impact” on the economy but it won’t be enough to shoulder Malaysia‘s economic growth.

“The positive impact of construction projects resuming or commencing in 2019 will see little feed-through over the remainder of the year,” the study revealed.

The researchers noted that the re-ignited China-U.S. trade war will have a huge impact on the Malaysian economy this year, particularly in the exports sector. Fitch Solutions then retained its previous forecast on the economy slowing down in 2019.

Last month, Prime Minister Tun Dr Mahathir Mohamad gave the green light to resume the multi-billion dollar East Coast Rail Link (ECRL) project with China. Many analysts at that time predicted that the Malaysian economy may pick up this year due to the revived project.

The ECRL project was resumed on slashed costs, Reuters and multiple other outlets confirmed. Since the announcement, the renewed project received mixed reviews from industry experts, with some saying they were unsure about how it would help the Malaysian economy recover.

Other economic analysts are more optimistic of what could be the beginning of Malaysia’s massive infrastructure initiative. PwC Growth Markets Center leader and partner David Wijeratne said construction projects are among the top three high growth areas in Malaysia within the next couple of years.

According to Wijeratne, the Asian Development Bank (ADB) estimated infrastructure investments in Malaysia to account for 10 percent of the expected $184 billion per year in investments required for projects within the ASEAN region.

The Star reported that PwC is expecting several factors to help Malaysia reach the 10 percent range in infrastructure projects. These include energy and utilities, digital connections, logistics, and transportation.

Meanwhile, Malaysia and Indonesia have been recognized as two ASEAN nations transitioning towards technology-based production within manufacturing segments. Analysts believe the switch will play a key role in economic developments.

High-tech manufacturing practices are expected to have a positive effect on Malaysia’s economic goals, with more Malaysian consumers opting for higher-quality products and services inclined to technology.

Last week, HSBC Global Research said the local economy was thriving despite external headwinds and lower confidence in Mahathir’s Pakatan Harapan (PH) government. The World Bank also retained its forecast on the country at 4.7 percent for this year.