KUALA LUMPUR, Dec 10 — United Overseas Bank (UOB) expects Malaysia’s economy to grow 5.2 per cent next year, driven by higher exports and benefiting from stronger demand as key global economies recover.

UOB Senior Economist Alvin Liew said the implementation of tax reforms, subsidy rationalisation and other initiatives in the government’s Budget 2014 would bring higher revenues and contain fiscal deficit at 3.5 per cent of the gross domestic product (GDP).

“Demand for Asian exports will increase with the economic recovery in the United States and a firm US dollar, directly benefiting countries with large export markets such as Malaysia,” he told a media briefing on the 2014 Economic Outlook here today.

Liew said the strengthening US dollar would cause the local note to ease to 3.30 against the greenback by the second quarter of 2014, but would not cause extreme volatile reactions.

“We expect a broadly higher US dollar against Asian currencies next year as a result of the Federal Reserve quantitative easing taper,” he said.

He said the bank was encouraged by measures that had so far been taken by Prime Minister Datuk Seri Najib Razak and his Cabinet, providing a positive environment for foreign direct investments into the country.

Other indicators of economic recovery, such as the current account, he said it would be better at 4.5 per cent next year due to higher trade growth while fiscal balance would register a narrower deficit of 3.5 per cent.

“Although the Asian currencies are expected to be weaker, the stock market will have more upside.

“If the exports sector is likely to look good, manufacturing-related stocks will be stronger,” he said.

On the bigger picture, he said there would be a monetary policy divergence next year, whereby the Fed is expected to be on the tapering front, thus lowering their expansionary, while the Bank of Japan would be adding on more. — Bernama