M’sia’s economy to continue steady growth momentum

Malaysia’s economy will continue its steady first quarter (1Q) growth momentum into the subsequent quarters, in line with that of most advanced economies, says Dr Yeah. — Reuters photo

KUALA LUMPUR: Malaysia’s economy will continue its steady first quarter (1Q) growth momentum into the subsequent quarters, in line with that of most advanced economies, according to an economist.

Sunway University Business School’s Economics Professor Dr Yeah Kim Leng, said the latest Purchasing Managers Index readings of most advanced and large emerging economies, such as China and India, remained in positive territory, thus will have spillover effect on other countries, including Malaysia.

“We expect the global tailwinds will sustain Malaysia’s growth momentum and importantly, we anticipate positive spillovers from higher exports to domestic private investment and consumption activities at least in the second and third quarter,” he told Bernama.

The key channels of transmission, he said, would be through income increases, improved investor sentiment and firmer consumer confidence, all which were buoyed by the better employment and wage prospects (as both export and domestic-oriented industries were lifted by higher spending).

The World Bank had revised upwards Malaysia’s 2017 economic growth to 4.9 per cent from the 4.4 per cent forecast in April, driven by strong private consumption following improving labour market conditions.

Its country director for Southeast Asia, Ulrich Zachau, said the revision, which echoed Malaysia’s economic growth of 5.6 per cent in Q1 this year, included increasing private investments and major government-led infrastructure projects as contributing factors.

It also revised the forecast growth for 2018 and 2019 to 4.9 per cent and five per cent respectively. The forecast for 2017 is an increase from the previous forecast, and slightly above the government’s projection range of 4.3 per cent to 4.8 per cent… and this is in line with consensus estimates, which expect a faster expansion in the economy.

Responding to this, Yeah said, a stronger lift from exports and bigger spillover effect on domestic demand as investors and consumers become more confident to spend, would be the key factors that could result in a stronger-than-expected growth projected for this year.

Meanwhile,  measures introduced by Bank Negara Malaysia to clamp down on currency speculators who had been using offshore market non-deliverable forwards to speculate on the ringgit, had paid off with the currency improving and foreign portfolio investors coming back.

Yeah, however, said some key external risks likely to threaten the growth targets, namely the protectionist policies in the US that President Donald Trump, may push through a faster-than-expected pace of interest rate normalisation and balance sheet reduction by the US Federal Reserve.

“Other challenges include a disorderly exit of Britain from the European Union or the so-called ‘Hard Brexit’ and a widening conflict among Gulf Cooperation Council members following isolation of Qatar.

“Internally, the rising living and business costs, currency weakness and political uncertainties arising from the forthcoming general elections that will be held later this year or latest by next April are some of the key challenges facing the economy,” he said. — Bernama

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