Malaysia’s economy to sustain growth above 5pc this year

Malaysia’s economy is expected to sustain growth of above five per cent this year, driven by exports. ― Malay Mail pic
Malaysia’s economy is expected to sustain growth of above five per cent this year, driven by exports. ― Malay Mail pic

KUALA LUMPUR, Feb 14 — After recording a higher-than-expected gross domestic product (GDP) growth of 5.9 per cent in 2017, Malaysia’s economy is expected to sustain growth of above five per cent this year driven by exports.

RHB Research Institute’s Chief Asean Economist, Peck Boon Soon, said like in 2017 whereby a surge in exports boosted Malaysia’s economic growth, the country’s growth strength for 2018 would still likely be driven by exports.

“As a result, we continue to envisage the export-driven growth to continue have a spillover effect on domestic demand,” he told Bernama.

However, he said, a slowdown in demand from China due to a more moderate economic growth projected for 2018 might pose a headwind for Malaysia’s exports and GDP growth.

“Similarly, if the trade protectionism continues to intensify and worsen, it could pose a drag to global trade and Malaysia’s growth as well,” he said.

Nevertheless, he said, if the country’s exports continued to do well this year, they were expected to generate a positive effect on the country’s current account surplus of which a surplus in current account would continue to provide an underlying support for the ringgit.

He said the cost of living was expected to stay elevated this year as inflation was projected to average about three per cent in 2018, compared with 3.7 per cent in 2017.

“With economic growth projected to sustain at a growth of above five per cent for 2018, it is hoped that it could help improve the people’s income and cushion the elevated cost of living,” he said.

Bank Negara Malaysia today released the country’s GDP for the fourth quarter which saw the Malaysian economy registered a growth of 5.9 per cent versus 4.5 per cent year-on-year and 6.2 per cent quarter-on-quarter backed by private sector spending, which continued to be the primary driver of growth.

For the year as a whole, the economy registered a robust growth of 5.9 per cent in 2017 versus 4.2 per cent in 2016.

On the GDP growth, Peck said, Malaysia recorded the highest growth in three years lifted by a surge in exports and a spillover into domestic demand.

He said real exports jumped by almost 10 per cent in 2017, after expanding by just 1.1 per cent in 2016 while domestic demand grew by 6.5 per cent in 2017, a pick-up from 4.3 per cent in the previous year, underpinned by stronger private consumption and investments as well as a recovery in public consumption.

Malaysia’s economic growth, compared with major ASEAN-5 economies, was the second highest after Philippines (6.7 per cent) and better in terms of growth compared to Singapore (3.6 per cent), Indonesia (5.07 per cent) and Thailand, he said.

Thailand’s economic performance figures are scheduled to be release on Feb 19 but the Thai central bank estimated the country’s GDP to grow between 3.8 and 4 per cent for 2017.

MIDF Amanah Investment Bank Bhd Chief Economist, Dr Kamarudin Mohd Nor, said Malaysia’s 2017 GDP growth, which beat the market’s expectation of 5.8 per cent, was expected to moderate to 5.5 per cent this year as economists believed it would be hard to beat 2017’s trade performance, which was the highest in 13 years.

“It would be hard to outdo 2017’s performance due to high base effect and 2017 was a very good year and exports, for example, grew by 18.9 per cent, the strongest since 2005,” he said.

He said domestic sector played a key role in supporting the growth and robust external trade performance in 2017 and also helped to contribute positively to the GDP growth.

Another economist said trade protectionism policy in the US was unlikely to have significant impact on the country’s economy but the ban against palm oil by the European Union could adversely impact Malaysia’s economic growth in 2018.

“Luckily, Malaysia’s trade partners are diverse, our economy is unlikely to be deterred much by the EU ban,” he said.

He also expected the ringgit to trade between RM3.95-4.00 against the US dollar in the second and third quarter this year on the back of a recovery of the greenback.

“Despite the recent strengthening of ringgit against US dollar, it is worth to note that much of it was due to the depreciation of US dollar rather than appreciation of ringgit per se.

Moving forward, he said, the ringgit would likely appreciate further if both the US dollar continued to weaken and oil price trended higher.

“However, at the moment I’m expecting the crude Brent to trade between US$65-70 per barrel while US dollar is likely to rebound eventually as inflation expectation in the US increases,” he said. — Bernama

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