RAM expects GDP to remain resilient at 4.6pc this year

RAM said indirect policy buffers such as the continuation of fuel price ceilings and a quick review of public sector projects have helped bolster resilience. — Picture by Ahmad Zamzahuri
RAM said indirect policy buffers such as the continuation of fuel price ceilings and a quick review of public sector projects have helped bolster resilience. — Picture by Ahmad Zamzahuri

KUALA LUMPUR, Aug 16 — The gross domestic product (GDP) growth this year is expected to remain resilient at 4.6 per cent, despite increasing global growth uncertainties amid protracted trade disputes, said credit rating agency, RAM Rating Services Bhd (RAM).

From the domestic demand perspective, it said indirect policy buffers such as the continuation of fuel price ceilings and a quick review of public sector projects have helped bolster resilience.

“Although some labour market indicators point to more sluggish conditions ahead, both direct and indirect policy support should help keep private consumption activity on its steadfast growth trajectory to come in at 7.1 per cent this year,” it said in a statement today.

RAM said private investment growth has taken a hit from economic uncertainties, but pockets of support have emerged in the form of positive trade diversion effects, as shown by the rise in foreign direct investment (FDI) activities and the continuation of infrastructure-related investments after a quick review period following the 14th General Election.

However, ongoing expectations of weaker economic prospects could hamper capacity-building activities.

“Hence, our expectation for private investment activity this year stands at a moderate 2.2 per cent (2018:4.8 per cent).

“Going forward, we expect the policy stance to stay supportive of growth, with potentially looser monetary policy and fiscal buffers at the ready,” said RAM.

Meanwhile, it said the potential moves on the Overnight Policy Rate (OPR) are anticipated to be largely data-dependent, in response to signs of significant downside risks to growth.

Accordingly, RAM maintained its expectation of the OPR ending the year at 3.00 per cent, while maintaining the view that there is scope for further loosening if required.

“Another factor that may support further easing is benign inflationary pressure that has prevailed.

“Headline inflation is envisaged to come in at the same rate of 1.0 per cent as it did last year, given the prolonged fuel price ceilings as well as a lower than expected passthrough rate of the Sales and Services Tax  introduced last September,” it added.

The full version of RAM’s Economic Update 2019 is available for download on its website at www.ram.com.my. — Bernama

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