Resilient global trade to prop up Malaysia's growth in 2018, says RHB Research

KUALA LUMPUR, Sept 20 —  RHB Research Institute expects Malaysia’s real gross domestic product (GDP) to grow at a quicker pace of 5.4 per cent in 2018 from 5.3 per cent estimated for 2017, and 4.2 per cent in 2016 amid a better global outlook.

Domestic demand would likely take centre stage in fuelling growth, as the spillover effects from strong external demand become more broad-based, said the research firm in a note today.

“Also, an improvement in revenue collection amid stronger economic growth and potential pre-election spending would likely lead to a modest increase in public consumption spending and investments, contributing to overall economic growth, instead of posing a drag as in previous years,” it said.

The Malaysian economy grew at a robust pace in the first half of 2017 (H1 2017), supported by a continued surge in exports and a strong increase in domestic demand.

As for Malaysia’s exports, RHB Research said it would continue to grow at a relatively healthy pace in 2018.

“Looking forward, we forecast real exports to grow at a sustained pace of 5.6 per cent year-on-year in 2018, from an expected 11.2 per cent in 2017.

“This is on account of strong demand for commodity products, a resilient pick-up in global semiconductor sales, and improving overall global trade activity,” it said.

Meanwhile, the current account surplus in the balance of payments in 2018 is envisaged to widen to RM30.3 billion or 2.1 per cent of GDP, from a surplus of RM24.7 billion (1.9 per cent of GDP) estimated for 2017 due to a wider merchandise balance and a smaller deficit in the transfers account.

On inflation, RHB Research said the headline inflation rate was likely to normalise in 2018 on the back of relatively stable fuel prices.

“However, it ought to be partly mitigated by the removal of subsidies on administered goods and the demand-pull effect from stronger GDP growth,” it added.

Bank Negara Malaysia, it said, would likely to increase the overnight policy rate by 25 basis points to 3.25 per cent next year, after maintaining rates at 3.0 per cent till end-2017, in tandem with major central banks’ moves to tighten monetary policy next year amid stronger global growth.

At the same time, the hike would be supported by the projected improvement in the Malaysian economic growth next year,” it added. — Bernama