KUALA LUMPUR, Dec 4 — RHB Investment Bank Bhd has maintained its gross domestic product (GDP) growth forecast for next year at 4.3 per cent, on the back of a further moderation in growth as export activity is expected to remain subdued.
“We keep our real GDP growth forecast for 2020 unchanged, as the protracted US-China trade tensions remain a main drag to global demand and the country’s exports despite a potential de-escalation,” the investment bank said in report today.
However, it pointed out that stronger domestic demand will help to prop up growth, in line with the higher allocation for development expenditure and resumption of infrastructure spending that is likely to spill over into inducing higher private investment.
“The challenging global economic environment has prompted Malaysia to rely more on domestic demand to prop up growth.
“This is likely to be boosted by a recovery in public investment as well as improvement in private investment, while private consumption growth is expected to be resilient,” RHB Investment Bank Bhd noted.
The investment bank also believed that the government would slow down the pace of its fiscal consolidation with additional spending of 0.2 per cent of GDP via development expenditure to stimulate construction growth.
As a result, the budget deficit will narrow to 3.2 per cent of GDP in 2020 instead of the earlier target three per cent and compared with 3.4 per cent this year, while raising inflation is expected to be manageable.
As growth is likely to weaken, the investment bank anticipated Bank Negara Malaysia (BNM) to cut its overnight policy rate (OPR) by 25 bps in 2020 to complement the fiscal stimulus spending.
“We believe BNM is likely to cut overnight policy rate (OPR) by 25 basis points to stimulate growth in 2020 while the ringgit is expected to appreciate amid a weakness in the US dollar,” it said. — Bernama