Investor Alert: Malaysia Faces Tough Going in 2015

The consumer sector, according to MARC, is going to drag on the economy in 2015. Inflation will weigh on private consumption, which accounts for 52% of GDP. Add to that a 6% goods and services tax that goes into effect this year and tighter controls on household credit, and it’s highly likely that consumption will fall, further slowing the economy.

According to CIMB Research, another area in for lean times is real estate, with the GST affecting would-be buyers who would likely hold off on potential purchases. CIMB said in a report, “The net effect is that 2015 could end up being a similar year to 2014 in terms of property transactions, which we would categorize as a lackluster year.”

Pressure on the ringgit has also cost the country more, as its foreign exchange reserves have dropped to their lowest level since 2011 and the currency itself has fallen to a five-year low. The spread between its sukuk—Islamic bonds—and comparable U.S. Treasuries has widened. In addition, in the local-currency debt market, central bank data at the close of the year indicated that in November, global funds cut their holdings of Malaysian government bonds by 5.8% to 236.5 billion ringgit ($66.9 billion); that’s the most since September of 2011.

But Malaysia isn’t just standing around waiting for things to improve. In December, its second-largest pension fund, the $31 billion Kumpulan Wang Persaraan (Diperbadankan), cut its cash holdings to become a net buyer of Malaysian stocks and bonds even as much of the rest of the world engaged in the emerging market selloff.

The fund’s CEO, Wan Kamaruzaman Wan Ahmad, has said in reports that he does not see much risk in emerging markets and believes that developing countries, with higher foreign reserves and current account surpluses, are in better shape than they were during 1997 and 1998. Malaysia’s ringgit may have lost 5.3% during the fourth quarter of 2014, but that’s a far cry from the 1997-98 crisis, when after the Thai baht was devalued, the ringgit fell 35%.

In addition, the country is promoting itself as a business education hub within Asia. In a push to achieve high-income nation status by 2020, Malaysia has wooed numerous western business schools, including several from the U.K., and it has become the eleventh largest exporter of educational services.

Malaysia’s Kuala Lumpur is also the home base for Asia e-University, a collaborative effort among 31 Asian countries. The Malaysian government is pushing for an increase in international online student enrollment from 7,000, where it was in 2010, to 130,000 by 2020.