AmWatch - Econ Watch : Emphasis on key economic areas to foster sustainable growth during the 11MP period, 21 May 2015

FOCUS OF THE DAY

Econ Watch : Emphasis on key economic areas to foster sustainable growth during the 11MP period

The Prime Minister will be presenting the 11th Malaysian Plan (11MP) today. The 11MP will be the final five years development plan as the nation leaps towards a profound transformation approaching Vision 2020. The development expenditure for the upcoming five years is likely to remain at RM230bil as the government aims to achieve fiscal prudence. The development plans under 11MP will likely stress on the following:- (i) expenditure to be centred on the 12 NKEAs (refer to Chart 1); (ii) continuously reduce budget shortfall; (iii) attain sustainable growth momentum; and (iv) achieve GNI per capita of USD15,000 by 2020.

During the 11MP period, the fiscal deficit will continue to reduce and the government will ensure that its debt-to-GDP will not breach the 55% threshold. Deficit level has narrowed over the years from as high as 6.7% in 2009 to 3.5% last year. Nonetheless, Malaysia is unlikely to realise its initial target for a balanced budget by 2020 considering the current economic climate and challenges at hand. That said, Malaysia aims to be a high income status economy with an estimated GNI per capita of USD15,000 by 2020. In 2014, GNI per capita had advanced to USD10,426 (or +47.7% from USD7,059 in 2009).  During most part of the 10MP period, growth was supported by the private sector. In the demand sub-segment of GDP, the component of private sector expenditure had contributed substantially to growth.

Investments have exceeded the average annual target of RM148bil set under the 10MP for the fourth consecutive year in 2014. Total approved investment had advanced to RM235.9bil in 2014, driven by both domestic (+7.1%) and foreign investments (+8.6%). Nonetheless, the government was unable to attain certain targets under the 10MP period, which include ratios for debt-to-GDP and fiscal balance. The government had previously envisaged a budget shortfall of 2.8% for 2015, compared to the current estimate for a shortfall of 3.2% in 2015. Meanwhile, debt level stood at 54.5% of GDP in 2014 (vs. the target of 49.9% for 2015).

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Others :

TSH Resources : 8.6% YoY fall in FFB output in 1QFY15     BUY

KL Kepong : Strong QoQ rebound in manufacturing EBIT in 2QFY15           BUY

Axiata Group : A comeback in the making             BUY

MRCB-Quill Reit : Stronger earnings ahead from Platinum Sentral’s contribution                BUY

CIMB Group : 1Q15 results below expectations HOLD

Lafarge Malaysia: Not quite there, yet   HOLD

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