KUALA LUMPUR, July 25 — The Malaysian Institute of Economic Research (MIER) has revised downwards Malaysia’s economic growth forecast to 4.8 per cent for this year from 5.6 per cent estimated earlier.

Executive director Dr Zakariah Abdul Rashid (picture) said the lower growth projection was due to external factors such as weak global recovery, China’s economic slowdown, moderate growth in ASEAN, financial market volatility and tightening of financial conditions.

Expressing concern over the slow export growth, Zakariah, however, said the economy is expected to pick up in the second half of the year on improved and expanding business spending.

“Somehow our engine of growth in the external sector is getting slower. Our exports are declining quite substantially, especially in April and May, while trade balance is very small,” he told a media briefing today.

Zakariah said that after registering a 4.1 per cent growth in the first quarter of this year, the economy is projected to perform more or less the same in the second quarter.

“Perhaps just a little bit better than the first quarter depending on June’s performance,” he said.

As for the second half of this year, MIER is confident that that situation would improve.

“Manufacturers are showing signs of expanding activities. They have good orders. Foreign investments also performed very well,” he said.

On the Overnight Policy Rate (OPR), Zakariah said there was no necessity to review the rate now.

Moving forward, Zakariah said the role of domestic demand would continue to be Malaysia’s key growth feature.

Exports need to come back, with exports diversification and improved market access, he added.

“Strategic reform initiatives and transformation programmes need to proceed or start to be implemented. If we want to become a high-income country, we should be moving towards innovation-driven economy,” he said.

Zakariah said there is a need to undertake structural reforms and continue with the fiscal consolidation plan.

“Currently, there’s not much room to manoeuvre as fiscal and monetary space is limited,” he said.

On the growth outlook for next year, Zakariah said that it was projected to be within 5.0 and 5.5 per cent on account of weak global economic outlook, overall tight fiscal and financial conditions and enhanced downward risk. — Bernama