Malaysia outperforms Singapore in Q3, rising household debt a concern

• Malaysia outperformed Singapore in Q3 2016 in terms of business confidence
• Overall prospects in Asia Pacific are affected by rising household debt

 

THE latest Global Economic Conditions Survey (GECS) from ACCA (the Association of Chartered Certified Accountants) and IMA (Institute of Management Accountants) shows that business confidence in Malaysia has remained steady during the third quarter of 2016.

The survey revealed that confidence across Asia Pacific has improved for the fourth consecutive quarter – thanks in large part to improved confidence in the region’s biggest economy, China.

ACCA Malaysia head David Chin, said: “Malaysia has outperformed Singapore and fellow regional trading partners this quarter in terms of confidence, which is a positive thing to note. But concerns about rising household debt predominantly observed in Malaysia, Singapore, Korea, and Thailand, has preyed on overall prospects within the region.

“Thus, the affordable housing incentives and enhanced tax incentives announced by the Prime Minister in the recent Budget 2017 will have significant implications and are a positive nudge towards addressing this household debt strain.”

According to ACCA’s report, 46% of respondents across Asia Pacific are feeling less confident about their prospects than the past quarter, which is well above the global average of 38%. This is despite improving confidence in general, aided by an improved outlook for China and Hong Kong.

On the global front, business confidence is at a 12-month high, boosted by increased prospects of government spending and recoveries in China and North America. But despite improvements in confidence, the world has yet to see it translate into a meaningful boost to hiring and investment.

The survey reported that only 19% of companies said they are considering hiring new staff, and 14% were looking at opportunities to invest in new technology. In every region, there were more businesses planning to cut staff than those planning to hire more.

Chin thinks that Malaysia should learn from the OECD in terms of investment driving confidence, saying: “North America is performing strongly in contrast to most other regions, helped by strong employment growth in the US. Meanwhile, confidence in China is at its highest level since 2012, which has had an uplifting effect on many emerging markets. Even Brazil, which has been in deep recession for several years, and Russia are showing tentative signs of improvement.

“Across the OECD there is a strong correlation between governments reaching for their wallets following years of austerity and improving confidence. This underlines the importance of investment to support economic growth.”

ACCA’s report also mentioned the upcoming presidential election in the US as a global risk factor, given the uncertainty surrounding it. Protectionist sentiments have been unusually pronounced, thus the outcome and response of the new President will be significant for the future prospects of global free trade.
 
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