External factors, not politics affecting investments, says economist

Standard Chartered Asean and South Asia chief economist Edward Lee.

PETALING JAYA: An economist has downplayed the impact of politics in private investment decisions, saying weak growth prospects were more of a deciding factor.

Speaking to FMT on the sidelines of an event here today, Standard Chartered’s Asean and South Asia chief economist Edward Lee said politics was talked about a lot in business discussions with foreign and domestic investors but it was hardly a factor in decisions to invest.

“Private investment was very bad last year, and it was not just Malaysia, partly because when businesses have a very weak growth outlook they would not want to commit investment money today,” he said after a briefing on Standard Chartered’s Global Research Briefing 2020.

A big factor in this was the US-China trade war, but Lee said developments on that front would benefit Malaysia’s economy.

Yesterday, the Socio-Economic Research Centre (SERC) said Putrajaya needed to prioritise a smooth leadership transition, set a clear direction for policies, deliver on unfulfilled manifesto promises, improve communications and execute programmes and projects timely to arrest slow growth in private investments.

Some observers have warned that investor confidence was being affected by uncertainty over policy continuity as businesses are unsure whether PKR president Anwar Ibrahim would continue Prime Minister Dr Mahathir Mohamad’s policies once he takes over as agreed by Pakatan Harapan.

For 2020, Lee estimates gross domestic product (GDP) growth to be steady but lacklustre at 4.5%, similar to 2019.

But, he said, there would be a more positive feeling on the economy.

“Last year we heard a lot of negative news because of the US-China trade war.

“It’s still a very important topic but there is hope for more stability and better times because of the truce.”

It has been reported that the world’s two largest economic powers are set to sign a truce ending a protracted trade war which has affected global growth.

Lee said the trade war had especially affected certain sectors last year, like the electric and electronic (E&E) sector, especially in the third quarter at the peak of trade tensions.

He believed that the E&E sector has bottomed out and that it would perform better than last year.

On the ringgit, Lee said for 2020 they expected it to fare slightly better against the US dollar than in 2019.

This year, he said, they estimated the ringgit to trade at RM4 to RM4.10 against US$1, compared to last year when it traded around RM4.10 to RM4.20 against US$1.

A key reason for this, he said, was the weakening of the US dollar due to the global growth stabilisation as a result of the trade war truce.