KUALA LUMPUR, Jan 22 — Standard Chartered predicts that Malaysia's gross domestic product (GDP) will experience a steady growth at 4.9 per cent this year compared to 4.7 per cent last year.
Its ASEAN and South Asia chief economist Edward Lee told a media briefing today that private consumption has risen steadily over the past few years where last year saw an increase to 56 per cent of the GDP when compared to 49 per cent in 2011.
"Consumer demand will be supported in 2019 by a healthy labour market, favourable tax changes, tax refunds and a minimum wage increase. The labour-market participation rate rose to an all time high of 68.5 per cent as of September 2018, while employment growth increased steadily to 2.6 per cent year on year (y-o-y).
"The unemployment rate was low at 3.3 per cent in the third quarter of 2018 (Q318), while wage growth was a healthy 5.7 per cent y-o-y. This should support real disposable income in an environment of low inflation," Lee said.
He also believed that the resumption of production capacity in the mining sector which was disrupted due to unplanned outages and pipeline repairs may also contribute to the 2019 growth.
The removal of the GST and return of the SST, coupled with a minimum 10 to 20 per cent minimum wage hike will also support more consumer spending even if it only affects roughly 3 per cent of the workforce.
When asked, Lee also elaborated that despite low consumer sentiment over the economy, the government rebates worth 2.5 per cent of the GDP is the equivalent to a 2.5 per cent fiscal boost.
"Let's assume half of the 2.5 per cent rebate go to individuals and let's assume people are very cautious to consume.
Even if only 10 per cent of that amount spends the money, that's worth 0.1 to 0.2 percentage point of the GDP," said Lee.
However, Standard Chartered is slightly bearish on growth beyond the consumer sector with government consumption might be hampered by the five per cent fall in government operating expenditure.
"The residential property market is burdened by high inventories; we estimate housing inventories at 28 months of sales.
"Residential construction (around 25 per cent of total construction) has contracted for three consecutive quarters in 2018.
"Civil engineering projects are supporting overall construction but tight fiscal discipline and cancellation of mega-projects may reduce support on this front in 2019," said Lee but also acknowledged that the housing overhang will correct itself in due time," Lee said.
