KUALA LUMPUR, June 19 — Malaysia will benefit from the trade war between US and China but such gains are expected to only partially offset the resulting losses, Bank Negara Malaysia has said.

The central bank’s new governor Datuk Nor Shamsiah Mohd Yunus also noted it was unclear when the benefits to Malaysia would kick in from the resulting trade diversion where companies relocate from China to avoid the higher taxes imposed by the US.

“There’s a lot of uncertainty as to when the increased investments, the higher productive capacity that the firms would be making in order to take full advantage of the trade diversion” would come about, she was quoted saying yesterday by newswire Bloomberg.

While expecting the trade diversion to add on 10 basis points to Malaysia’s economic growth rate for 2019, Nor Shamsiah noted that the uncertainty over when the benefits would materialise is the reason why BNM had only included the anticipated losses from the trade war in its forecast for Malaysia’s economic growth instead of also taking into account the expected gains.

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BNM is predicting a growth rate of 4.3 per cent to 4.8 per cent for Malaysia this year.

Malaysia is well-poised like its neighbour Vietnam to benefit from the US-China trade war due to its open economy and manufacturing industry, Bloomberg said, but also noted the trade war and a slower economy worldwide has weighed down on export-oriented Malaysia.

“On a net-net basis the benefits from the trade diversion will not help fully offset the impact, the loss from the trade war,” Nor Shamsiah reportedly said in her first formal interview with international news agencies close to a year since she became BNM governor.

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According to Bloomberg, Nor Shamsiah expects positive growth for Malaysia next year as the government restores some projects.

She reportedly said the Malaysian government would have to make its spending more efficient and pour in funds to projects with bigger economic spillover effects, as well as rationalise investment incentives to take advantage of the trade diversion benefits.

When asked if Malaysian banks were doing enough to support the country’s economy, Nor Shamsiah pointed to the statistics which show high loan disbursements, while also explaining that loan demand has decreased amid a slower economy.

“Loan disbursements for the first quarter of this year is at the highest level as compared to the five-year average, but loan applications have been moderating since November last year. When you look at the outstanding amount, loan growth has been slowing because applications have been moderating. Repayments have been on the rise.

“It is a demand factor because loans are driven by the general macroeconomic environment. Now you have a situation where the economy is growing at a slower pace.

“The banks have been very supportive of businesses and households in their lending activities. They have to be responsible in their lending activities. Actually they would be competing with each other to lend to borrowers who are creditworthy,” she was quoted saying by Bloomberg.