KUALA LUMPUR, Oct 8 — A series of spending cuts by Putrajaya will weigh on Malaysia’s growth in 2014, the World Bank predicted in its latest East Asia Pacific Economic Update.

This comes as Malaysia announced a review of major infrastructure projects to meet its aim of reducing its deficit-to-gross domestic product (GDP) ratio to 3 per cent by 2015, along with the resumption of subsidy cuts under its “rationalisation” programme.

“Domestic demand will start facing headwinds from fiscal consolidation earlier and more extensively than previously anticipated, although investment growth should retain some momentum given the extended implementation period of many ongoing projects,” the global finance body said in a report released yesterday.

The World Bank also revised Malaysia’s GDP growth for 2013 to 4.3 per cent, down from 5.1 per cent earlier. GDP growth for 2014 and 2015 were both revised to 4.8 per cent.

The bulk of the lower outlook was due to Malaysia’s weak performance in the first half this year, it said, consistent with other revision of figures given by other sources such as Bank Negara Malaysia (BNM) and the Asian Development Bank (ADB).

World Bank stated that growth in 2014 and 2015 will be stunted by both spending cuts and a possible tightening on loans, but might be remedied by improved external conditions.

It expected consumption to pick up only in 2015 as spending cuts ease off, but only modestly unless Putrajaya decides to accelerate its structural reform.

Malaysia is also expected to be on track to reduce its deficit-to-GDP goal of 3 per cent by 2015, as the World Bank expected the figure to narrow from 4.1 per cent this year to 3.6 per cent next year, and 3.3 per cent in 2015.

However, it said this required Putrajaya to commit to spending curbs — especially in civil servants’ pay, and supplies and services — and broaden its tax base to sources other than oil.

The World Bank’s outlook was at odds with another forecast by the ADB last week, which predicted Malaysia’s recovery in 2014, albeit at the cost of rising inflation.

According to ADB, the sub-region will benefit from stronger growth in the US and the Europe predicted next year, while recent depreciation of Southeast Asian countries’ currencies will help raise exports.

ADB also projected in the same report that Malaysia will grow by only 4.3 per cent this year and not 5.0 per cent as previously expected.

Malaysia has started on a series of fiscal consolidation move, starting with raising the pump price of RON95 petrol and diesel by RM0.20 per litre starting from September 3, to RM2.10 and RM2.00 per litre respectively.

The subsidy cut was announced by Putrajaya following global ratings agency Fitch, which revised Malaysia’s sovereign debt outlook from “Stable” to “Negative” in July.

Maybank Investment Bank had since predicted last month that gas and electricity prices are likely to be next in a round of price hikes following the fuel subsidy cut.

On Sunday, Domestic Trade and Consumer Affairs Datuk Hasan Malek hinted that Putrajaya might slash subsidies for flour and sugar in Budget 2014.