KUALA LUMPUR, Aug 15 — BMI Research today downgraded of its outlook for Malaysia’s gross domestic product (GDP) growth for 2016 and 2017 after the country recorded five consecutive quarters of receding economic expansion.

It said its projections for 2016 and 2017 were now 4.1 per cent and 4.7 per cent, respectively, down from 4.5 per cent and 5.0 per cent that it previously estimated.

The Fitch Group research house said the downgrade was made after it concluded that economic headwinds experienced in the previous quarter are unlikely to abate soon.

"In seasonally adjusted annualised quarter-on-quarter terms, the economy slowed in Q216, growing by just 0.7 per cent (from 1.0 per cent recorded in the previous quarter) and we believe that momentum is unlikely to pick up significantly despite the central bank’s July interest rate cut,” it said in its report on Malaysia’s economic outlook today.

"In addition, the export sector is unlikely to see a significant recovery as ongoing weakness in the Chinese economy continues to act as a drag on exports.

"While the stabilisation of oil prices will lend a degree of support to the economy, efforts to boost growth will be capped by the lingering effects of domestic headwinds such as the raising of the minimum wage, which will weigh on the cost of production,” it added.

The report said that while both expenditure and production indicate that the export-oriented manufacturing sector is expanding, a significant recovery is still unlikely due to the slowdown in China, which makes up approximately 12 per cent of Malaysia’s total exports.

It further stated that there are still lingering effects from the introduction of goods and services tax (GST), which will continue to weigh on spending, while the recently increased minimum wage would fuel inflation.

in an effort to reduce dependency on foreign workers, the government enforced an increased minimum wage of RM1,000 a month in the peninsula and RM920 in Sabah and Sarawak from the previous RM900 and RM800 respectively, which came into effect July 1.

Prime Minister Datuk Seri Najib Razak earlier this year projected that the country’s GDP growth in 2016 would be in the region of 4.3 per cent due to an uncertain global economy.

In 2015, the local economy expanded by 5.1 per cent.