KUALA LUMPUR, March 22 — Malaysia’s gross domestic product (GDP) is expected to grow 5.2 per cent in 2018, easing slightly from 5.9 per cent in 2017 on the back of slightly tighter credit conditions and moderation in export growth.

Institute of Chartered Accountants in England and Wales (ICAEW) Economic Advisor and Oxford Economics Lead Asia Economist Sian Fenner said the 2018 outlook would be determined more by the health of Malaysia’s import partners and global trade dynamics.

"In addition, further interest rate rises following the January hike may be brought forward if a tightening labour market triggers unexpectedly strong wage growth in 2018,” he said in a statement today.

Exports outlook also staged an impressive recovery.

With the signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Malaysian firms will be provided with preferential access to ten markets, accounting for 13 per cent of global GDP.

ICAEW said however, this positive development was dampened by European Union’s move to ban the use of palm oil in biofuels from 2021, which would disproportionately fall on low-income rural households as Malaysia is the world’s second largest palm oil exporter.

It added that domestic demand was expected to remain the mainstay of Malaysia’s growth in 2018 with improving labour market conditions, rising manufacturing wages and the many populist measures announced in the 2018 budget should continue to support household spending this year.

However, household spending is likely to moderate this year as debt servicing costs increase in line with the rise in domestic borrowing rates, and fading fiscal support post-election. 

Looking ahead, fundamentals remain encouraging for continued private sector investment and growth in Asia on the back of robust world trade growth at 5.2 per cent this year, upbeat business sentiment due to China’s One Belt One Road initiative and CPTPP and relatively muted outlook on inflation and foreign exchange.

Meanwhile, interest rates are unlikely to rise significantly over the next 12 months.

"With all factors considered, the current outlook still paints a relatively promising picture for the region this year.

"We maintain our forecast of a moderate growth for the region at five per cent, as the momentum from 2017 will extend into this year and growth will be underpinned by the same drivers that have made last year such a success,” said ICAEW Regional Director, Southeast Asia Mark Billington.  — Bernama