The United States Federal Reserve’s decision to lift interest rates poses a potential threat to economic growth in emerging market economies, Juwai IQI Co-Founder and Group CEO Kashif Ansari said.
In a new analysis released by him, he suggests that, despite these challenges, Malaysia is well positioned for economic growth and an improving real estate market.
He said that when income and employment climb in Malaysia, there is generally a positive impact on the real estate market. “That’s why our forecast for 2022 predicts increasing transaction flow,” he said.
Kashif Ansari said that his agents are seeing an increase in activity. “Prices are still stable, but transactions are increasing. Buyers are more willing to purchase real estate than just three months ago,” Kashif Ansari said.
He said that buyers are more optimistic about the future and about their own economic prospects. As the economic acceleration continues into the second half of the year and into 2023, we also expect residential prices to begin climbing in certain submarkets.
On how the rate increase will impact Malaysia, he said that with rates climbing in the U.S., he said that the country is relatively well placed to endure the Fed’s actions.
“Malaysia’s significant current-account surplus will help insulate the economy from rising rates in the U.S. Malaysia has earned more from its exports than it has paid for imports since 1997 and has maintained this surplus during the pandemic,” he said.
He said that Malaysia does have significant external debt, which can be risky at a time when the ringgit is falling.
However, Kashif Ansari said that the spending that helped contribute to that debt is what helped Malaysian families and companies survive the worst of the pandemic. Because of that spending, we are better placed for an economic rebound.
“Malaysia also has inflation under control and ranks 10th best in performance on this measure, according to a recent study conducted by the Economist, that uses data from the IMF and World Bank,” he said.
He said that he believes that the international demand for Malaysian exports will continue to increase in 2022 due to fast economic growth in the U.S. and the rebalancing of supply chains. This will help offset any negative impact from rising rates.