KUALA LUMPUR, Dec 18 — MIDF Research expects Malaysia’s gross domestic product (GDP) growth to slightly improve to 4.9 per cent in 2019 from 4.8 per cent projected for 2018, mainly driven by healthy domestic spending fuelled by the service sector, coupled with the rebound anticipated in the agriculture and mining sectors.
Chief Economist Dr Kamaruddin Mohd Nor said the domestic growth driver —the service sector, which is expected to grow by six per cent next year — would continue to be supported by the country’s strong labour force and wage growth.
“Currently, our unemployment rate stands at a very low level of 3.3 per cent, while the country’s wage growth registers about six to seven per cent increase, which has helped to fuel domestic spending.
“For instance, statistics show that between RM42 billion and RM43 billion were spent on a monthly basis during the goods and services (GST) tax holiday from June to August, indicating that the sentiment is still positive and it is good for the domestic economic growth,” he told a market outlook media briefing here today.
On the agriculture and mining sectors, Kamaruddin said the research house expects about a one per cent rebound in the crude palm oil price for next year from the current level of about RM1,960 per tonne, while the mining sector, which declined about 2.2 per cent this year, is also expected to improve next year.
“These factors would continue to fuel the domestic economic growth until 2019 and lead to our GDP growth target of 4.9 per cent next year,” he said.
On inflation, Kamaruddin said MIDF Research predicts the benchmark inflation guide — the consumer price index (CPI) — to inch up to 2.2 per cent in 2019 from the full-year target of 1.3 per cent for 2018.
“The CPI would mainly be influenced by the higher crude oil prices compared to this year’s, as well as the implementation of the targeted fuel subsidy by the government as announced in the 2019 Budget, as we see it would have some implications on the prices of goods,” he said.
He added that clarity in domestic policy direction observed through the mid-term review of the 11th Malaysia Plan and 2019 Budget would also lend support to the domestic sector.
Nevertheless, he said the growth would be influenced by various external factors such as trajectories of global trade, threats of protectionism, geopolitical risks and volatility in commodities prices.
Meanwhile, Kamaruddin said MIDF Research also expects Bank Negara Malaysia to maintain the overnight policy rate (OPR) at 3.25 per cent next year amid decent economic growth. — Bernama