Economic think tank lowers Malaysia’s growth to 4.5pc for 2017

KUALA LUMPUR, Jan 19 — The Malaysian Institute of Economic Research (MIER) downgraded today its 2017 forecast for the country’s growth to 4.5 per cent from an initial high of 5.5 per cent.

The economic research non-profit’s executive director Zakariah Abdul Rashid attributed this to external headwinds affecting global trade and investments.

“External demand is not as strong as expected although commodity prices are showing sign of recovery, the slowdown in global trade and investment flows is expected to prolong,” he said when presenting MIER's fourth quarter economic outlook for 2016 here.

Zakariah said the Malaysian GDP was affected by the slowdown in the US, China and Japan which have been affected by political factors.

“Growth in major economies are slower than expected, particularly for China and Japan. The protectionism sentiment in developed countries is gaining momentum, thanks to recent political development across the world,” he said.

Among the political concerns he highlighted was the rise of Donald Trump to the position of US president despite assurances from the International Monetary Fund (IMF).

“IMF says there will be slight improvement in world economy or East Asian economy but it is still very fragile, there is no strong evidence especially when you consider the Trump factor.

“Many people do not know where the American economy is heading... there is still a lot of uncertainty about the economy there,” Dr Zakariah said.

Due to these external factors, the economist also said the inflation in Malaysia would also increase this year.

“In 2017, inflation will increase. High inflation is expected due to high consumer spendings," he added.

MIER predicts that the Malaysian GDP will be driven by domestic demand in 2017 while orders outside the country dwindle.

“Domestic demand will continue to be the engine of growth in Malaysia. External orders are to deteriorate further,” he said.

MIER previously predicted a growth of 4.2 per cent for Malaysia in 2016, down from 4.7 per cent due to weak exports and an economic slowdown in China, Malaysia’s biggest trade partner.