This article first appeared in The Edge Financial Daily on June 8, 2018 - June 14, 2018

KUALA LUMPUR: The Institute of Chartered Accountants in England and Wales (ICAEW) has turned cautious about the country’s investment outlook following Pakatan Harapan’s review of all major infrastructure projects.

“Malaysia is an exception where we have become more cautious about the outlook for investment following the recent election win by [Prime Minister Tun Dr] Mahathir [Mohamad]’s coalition party and planned review of all major infrastructure projects,” ICAEW said in its latest “Economic Insight: South-East Asia” report.

Still, ICAEW said Malaysia’s economic growth as measured by gross domestic product (GDP) is expected to remain above the average for 2012/16.

GDP grew 5.4% in the first quarter and is projected to expand to 5.5% to 6% for the year according to a Bank Negara Malaysia forecast.

On the broader region, ICAEW said the outlook for the Southeast Asian economies remains positive, with improving labour market conditions and rising wages to bode well for consumption.

“The momentum from a solid recovery in private investment [excluding construction] across most of Southeast Asia in 2017 is expected to have partly spilled over into 2018,” it added.

However, in terms of economic growth, ICAEW forecast a mild deceleration in Southeast Asia’s GDP growth to 4.9% in 2018 from 5.2% in 2017.

“The slowdown is expected to be broad-based, with only Indonesia growing faster than in 2017,” it added.

On exports, ICAEW said notwithstanding the downside risk from US-China trade friction, a slump in global trade is unlikely.

“We think it is more likely that tariff imposition will be contained and greater intra-regional trade and the increase in domestic demand contribution to GDP will protect Asia’s growth to some extent,” ICAEW regional director for Southeast Asia Mark Billington said in a separate media statement yesterday.

Billington added that the broader economic tension and rivalry between the US and China is on the rise with serious long-term implications, especially in the area of technology.

“This is consistent with our view that export growth across the region will ease after a strong acceleration in 2017, reflecting softer Chinese import demand and normalisation in the global electronics cycle,” ICAEW said.

On monetary policy, ICAEW said most Southeast Asian central banks have started tightening monetary policy, which could lead to higher debt servicing costs.

“However, interest rates would need to rise at a much faster pace than our current projections for debt to meaningfully damage growth across the region.”

Amid contained inflationary pressure, ICAEW said most central banks are expected to remain on the sidelines for the rest of the year with rates lagging that of the US Federal Reserve.