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KUALA LUMPUR: Malaysia’s economy is projected to expand at a minimum four per cent in the second quarter of this year, supported by exports, said IBC Assets Bhd head of research Dr Serge Pierre Besanger.

While imports dropped by 9.2 per cent to RM65.9 billion in June from a year ago, he said it is exports-minus-imports that contribute to gross domestic product and there was a significant improvement on that front, with the balance of trade widening to RM10.3 billion in June, from RM9.1 billion in the previous month.

Still, capital expenditure is likely to have dropped sharply in the second quarter, as evidenced by the steep fall in imports of capital goods, added Basanger who is a former acting director at the IMF-Singapore Regional Training Institute during the Asian Financial Crisis.

“Capital expenditure will eventually recover, bolstered by infrastructure projects and the redesign of value chains,” he said, citing a recent Nomura research report that ranks Malaysia as one of the four largest beneficiaries of trade diversion from the ongoing trade dispute between the United States and China.

Basanger said while Thailand and Indonesia could lose their generalized system of preferences status due to persistent allegations of intellectual property breaches, Malaysia is immune to such threats because it is essentially a level playing field and the country has a strong track record in respecting intellectual property.

He said private consumption is expected to grow at a healthy rate of at least five per cent in the second quarter despite a slight uptick in unemployment and a tight fiscal policy which is set to weigh on domestic demand as the government works on gradually reducing the budget deficit.

“Private consumption will remain a key growth driver of the Malaysian economy.”

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