Malaysia to suffer most from Brexit, say Japanese economists
Malaysia to suffer most from Brexit, say Japanese economists
Having amassed large amounts of credit to British banks and invested heavily in UK real estate, Malaysia will allegedly bear the brunt of Britain’s referendum to leave the EU
While it was previously reported that Malaysian developers in the UK are optimistic about their projects post-Brexit, the Japan Center for Economic Research (JCER) feels otherwise, warning that the country will bear the most exposure to detrimental after-effects of the referendum.
Malaysia is more heavily indebted to British institutions than other Southeast Asian countries, JCER revealed in their new forecast. The country also has the most foreign direct investments in Britain, compared with Indonesia, the Philippines, and Thailand.
Last year, Knight Frank found Malaysia to be the third largest Asian investor in the Australian and British property markets.
Malaysia maintains close trade relations with the UK. Exports to the UK and other EU countries account for just below 7 percent of the Malaysian gross domestic product (GDP), the highest among the four ASEAN countries surveyed by JCER.
Overall, exports account for about 70 percent of Malaysia’s GDP.
More: Yet another Asian investor staking their claim in post-Brexit London
Malaysia’s dependence on exports to China will also weigh down on the ASEAN country. JCER predicts China’s real GDP growth rate in 2016 to wind down to 6.5 percent.
Although real estate investment propped up China’s GDP growth in H1 2016, a slower capital market is proving a hindrance to the country’s economy.
JCER has projected that real gross domestic product (GDP) growth in Malaysia will fall to 4.1 percent for both 2016 and 2017, down from 5 percent last year. An earlier forecast this year had predicted 4.5 percent and 4.7 percent in 2016 and 2017, respectively.
Such GDP growth would be the lowest in Malaysia since the 2009 recession.
JCER observed that Brexit has had negligible immediate ramifications on stock prices and exchange rates in these countries. The growth rate for the four ASEAN economies has been projected at 4.6 percent.
JCER expects an uptick in monetary easing measures, such as interest rate cuts, across the region.
Read next: Malaysians are now the third-largest Asian investors in UK and AU
Source: Property Report