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Malaysia to benefit most from global supply chain reshuffle

Malaysia to benefit most from global supply chain reshuffle

16 Jan 2023

Malaysia is expected to be one of the key beneficiaries of the global supply chain reshuffle, said HSBC co-head of Asian research Frederic Neumann.

The supply chain rejigging is caused by several factors that occurred in recent years, especially the Covid-19 pandemic and the Ukraine-Russia war.

“The supply chain reshuffle is allowing for growth opportunities around the region. Malaysia will be one of the key beneficiaries of the supply chain rejigging, especially in the manufacturing sector,” Neumann said at HSBC Global Research’s webinar on 2023 Asian economic outlook today.

This positive outlook on the local economy is despite Malaysia’s slower growth forecast from about 8.0 per cent in 2022 to estimated 4.0 per cent this year.

Neumann stated that  even though the expected growth would be significantly less, it would still be considered robust.

In terms of foreign direct investment (FDI), he said Malaysia would continue to grow as FDI was driven largely by competitiveness.

HSBC rates strategist for Asia PAcific Pin-Ru Tan said inflation had been largely compressed, contributing to Malaysia’s growth, but would slow down during a trade recession, as would all countries.

However, Malaysia’s outperformance in trade indicates that it will see a trade contraction even if trade slows.

Being one of China’s export partners, Malaysia would experience increased growth from China re-opening its economy, Tan added.

Neumann said bilateral investment between Malaysia and China would likely increase, especially in the manufacturing sector, and the trade and investment will benefit the Malaysian economy.

In 2022, Malaysia proved itself to be a clear regional outperformer, and expanded at a firm rate of 1.9 per cent quarter-on-quarter in the third quarter of the year.

This translated to a year-on-year growth of 14.2 per cent, making Malaysia Asean’s top performer for the second consecutive quarter.

Malaysia’s booming domestic demand has been the main growth driver, reflecting a continued re-opening tailwind.

“Thanks to an ongoing improvement in its labour market, retail sales have seen speedy recovery, with consumption of goods and most services exceeding pre-pandemic levels, except some sectors related to tourism.

“However, there is no room for complacency, as downside risks will likely materialise in 2023,” said Neumann.

He also said despite a cooling trade cycle, Malaysia’s external engine remained resilient in the second half of 2022, benefitting from its well-diversified mix of exports.

While some commodity prices cooled, they stayed at an elevated level, boosting Malaysia’s energy exports.

Source: NST