Malaysia’s recovery momentum in 2017 has been stronger than expected amid the firmer rebound of investments in productive capacity and external demand. As such, Malaysia’s GDP growth appears likely to reach 5.8 per cent this year, exceeding RAM Ratings’ initial forecast of 5.4 per cent. — AFP photo
KUCHING: Malaysia’s recovery momentum in 2017 has been stronger than expected amid the firmer rebound of investments in productive capacity and external demand.
As such, Malaysia’s gross domestic product (GDP) growth appears likely to reach 5.8 per cent this year, exceeding RAM Ratings’ initial forecast of 5.4 per cent.
“We project GDP growth to come in at 5.2 per cent in 2018, with support from strengthening domestic demand and resilient external markets,” it said in a press statement following Bank Negara Malaysia’s (BNM) announcement of Malaysia’s third quarter of 2017 (3Q17) economic performance.
It noted that private consumption and investment are anticipated to register more robust growth in 2018.
“Private consumption will be underpinned by healthier labour market conditions and sustained wage growth, thereby posting a 7.2 per cent expansion next year, slightly better than the seven per cent expected this year.
“On the other hand, private investment will be boosted by the roll-out of big-ticket infrastructure projects and resilient investment by firms, attributable to sustainable economic growth and prospects.
“Private investment growth is anticipated to clock in at a robust eight per cent in 2018, compared to the 8.8 per cent expected this year,” it explained.
Although there has been some tapering of the low-base effects that had contributed to the export boost in 2H17, RAM Ratings said that this has not disrupted the underlying resilience of exports.
“As such, growth momentum should be maintained, albeit at a more modest pace compared to the initial recovery boost.
“Export growth is envisaged to come in at 4.1 per cent next year, supported by the continued expansion of export orders and production trends in our main export markets. Import growth is anticipated to again trump export growth, coming in at 5.4 per cent in 2018 amid ramped-up investments and positive spillover effects from resilient exports,” it projected.
RAM will be closely watching the development of the core inflation, which has been rising this year, albeit more moderately of late.
In 2018, it said, headline inflation is expected to moderate to 2.5 per cent from the projected 3.8 per cent for this year, against the backdrop of dissipating fuel price recovery effects and the corresponding low-base effects that were prominent in the first quarter.
“We reiterate our view that there is room for Bank Negara Malaysia to hike the OPR, to ensure sustainable growth and that destabilising price pressures will not turn into a downside risk for growth.
“Any tightening of monetary policy is envisaged to be gradual; hence a 25bps OPR hike may be on the cards for 2018,” noted RAM’s economist, Kristina Fong.