MALAYSIA’S GDP 2018 PROJECTED TO GROW 5.3 PCT

KUALA LUMPUR, March 6 (NNN-Bernama) Malaysian Rating Corp Bhd (MARC) has forecast Malaysia’s gross domestic product (GDP) growth at 5.3 per cent this year on the back of resilient private consumption.

Chief Economist, Nor Zahidi Alias, said the pace of growth in private consumption would likely accelerate and surpass the growth trend of seven per cent, backed by improvements in the labour market.

Growth support should be forthcoming from the ongoing implementation of large infrastructure projects, such as the MRT2 and LRT3 projects, the Pan Borneo Highway and Menara Warisan, he said at a briefing on Malaysia’s Economic Outlook 2018 here today.

MARC’s projection on Malaysia’s economy was in line with the International Monetary Fund (IMF) which forecast global output and trade volume to grow at 3.9 per cent and 4.6 per cent respectively in 2018.

More robust global trade would minimise external vulnerability in the near term although negative repercussions from trade protectionism could offset some gains, Nor Zahidi said.

He said the Malaysian economy was expected to benefit from the improving oil market and rising crude oil prices which have risen above US$65 (US$1 = RM3.89) per barrel as at end-February.

If the prices are sustained at current levels or rise further, the government’s revenue growth, as well as overall business sentiment, should improve.

“This should also give a boost to the investment climate, which will be positive for the ringgit corporate bond issuance market,” he said.

The ringgit was forecast to trade around RM3.80-RM3.90 against US dollar if oil prices stayed around US$60-65 per barrel.

Nor Zahidi said, however, the ringgit would be affected by developments in the US economy such as economic growth and interest rate increases which could trigger capital outflow.

Based on historical trends, MARC is expecting a downside of about 5-6 per cent to the ringgit, bringing the local unit to about RM4.15-4.20 against the US dolar, if outflows were to happen, he said.

He said there was also a possibility of Bank Negara Malaysia (BNM) raising the overnight policy rate (OPR) by another 25 basis points in the second half of this year if headline gross domestic product (GDP) growth exceeded 5.5 per cent.

But if it (economic growth) still remains what it is right now, our projection for the real GDP is 5.3 per cent, and our base case projection (for the OPR) is still about 3.25 per cent, Nor Zahidi said.

Malaysia’s GDP grew 5.9 per cent in last year, the strongest since 2010 driven by domestic demand and strong export performance.

In January this year, BNM raised the OPR by 25 basis points to 3.25 per cent, the first increase since July 2014, to normalise the degree of monetary accommodation and to pre-emptively ensure that the stance of monetary policy was appropriate to prevent the build-up of risks that could arise from interest rates being too low for a prolonged period of time. NNN-BERNAMA

Source: NAM News Network