KUALA LUMPUR (Sept 27): UOB Global Economics & Markets Research expects Malaysia's overall growth to ease from 4.6% in 2019 to 4.4% in 2020.

This comes on the heels of index provider FTSE Russell's announcement that Malaysia will remain in its World Government Bond Index (WGBI) with 0.4% weight of index.

Nonetheless, Malaysia will be maintained on the watch list of FTSE Russell until the next interim review in March 2020, as there were a few measures that helped to sustain Malaysia's position in WGBI to ensure sufficient progress of reform.

UOB said that ultimately, FTSE Russell will retain Malaysia in the WGBI but lower the index weight for Malaysia to pave the way for China's inclusion.

"We estimated that the potential exposure from these actions of a lower weight by 0.1% in the FTSE Russell's WGBI and 0.95% in JP Morgan GBI-EMI is around RM10 billion-12 billion or equivalent of 6%-9% of foreign holdings of government bonds or 1% of total bonds outstanding," it said.

The research firm said Malaysia's economic growth stayed robust with real GDP expanding 4.7% year-on-year in the first half of 2019, bucking the regional trend of decelerating growth.

It added that the economy was lifted by resilient domestic demand amid robust private consumption.

"This will be supported by an expansionary budget for 2020, continued recovery of commodity production, supportive labour market conditions, and potential benefits from trade diversion amid ongoing US-China trade disputes," it said.

UOB said it anticipated USD/MYR to continue moving in tandem with USD/CNY as it maintained its view of a modestly higher level of 4.19 by end-2019 and 4.26 by mid-2020.