Fitch Solutions cuts construction outlook as Putrajaya axes 1MDB projects

Justin Ong
BMI Research adjusted its full year growth forecast for the construction sector to 4.4 per cent, down from 5.4 per cent previously. — Reuters pic

KUALA LUMPUR, Aug 15 — Malaysia’s property sector will grow at a reduced rate of 4.4 per cent this year owing to the government’s bid to cancel developments linked to the 1MDB corruption scandal, Fitch Solutions predicted today.

The Fitch Group unit said it was lowering its forecast due to the Pakatan Harapan administration’s attempt to discontinue such projects as the East Coast Rail Link (ECRL) and others suspected to be part of the ongoing corruption and money laundering investigations.

“Planned and ongoing large-scale real estate developments, particularly those sponsored by the 1MDB investment fund or ones involving Chinese investors, are likely to come under scrutiny,” it said in a research note today.

Among others, it pointed out that work on the Tun Razak Exchange was suspended for May and June, although Fitch Solutions noted that this has since resumed.

However, it expects projects such as Bandar Malaysia that are still in the preliminary stages to be entirely discontinued.

“Projects backed by Chinese companies or investors could also come under scrutiny, with Mahathir criticising the Forest City complex in Johor during the campaign period and pledging to review all China-backed projects in the country,” it said, referring to Prime Minister Tun Dr Mahathir Mohamad.

Fitch Solutions then adjusted its full year growth forecast for the construction sector to 4.4 per cent, down from 5.4 per cent previously.

It also cut its annual average for the period between 2018 and 2027 to 3.7 per cent from 4.7 per cent before.

The prime minister will head to China soon and attempt to convince Chinese firms previously awarded suspicious contracts by the previous Barisan Nasional government to cancel or at least postpone these.

The new government previously announced that it could not afford to carry out such projects now due to the discovery of the country’s RM1 trillion in debt and liabilities.