KUALA LUMPUR, Sept 3 (Bernama) -- The 2020 budget may see the government pursue a more gradual fiscal consolidation path given the more challenging growth outlook, but this should not raise any rating concerns, said Standard Chartered Global Research. 

“There is room for Bank Negara Malaysia (BNM) to calibrate its monetary policy response to support growth given its tactical rate cut in May and resilient growth outturn.

“Investor appetite for the duration is supported by ample local liquidity, a loose monetary policy outlook and benign supply pressure,” it said in a note.

The research house said new revenue measures have been implemented and will help to address tax change-induced revenue shortfall.

Meanwhile, it said the re-starting of mega infrastructure projects is expected to help catalyse private investment.

“Investment approvals were up more than 60 per cent year-on-year in the first half of 2019, with strong local and foreign participation,” it said, adding that Malaysia has seen an increase in diverted orders and investment interest due to the US-China trade war.

However, the research firm said Vietnam is seen as a keen competitor on this front.

“That said, the sort of investment that Malaysia hopes to attract is different. For example, Malaysia cannot compete with Vietnam on cost base and labour availability. Hence, it will look for higher value-add and less labour-intensive investment,” it said.

Additionally, the central bank had already said that should the trade war escalate, gross domestic product growth may be affected by another -0.1ppt in 2019.

--BERNAMA