Maybank IB maintains 4.4pc forecast
KUALA LUMPUR: Maybank Investment Bank retained its economic growth forecast for this year at 4.4 per cent amid fluid global economic, market, commodity price, political and policy situations, although it acknowledges potential upsides on the external trade side.
“The key takeaway here is that narrower 2017 real gross domestic product (GDP) growth forecast range and the relatively stable point forecast for this year’s real GDP growth means Bank Negara expects growth to be better this year after slowing in the last two years, underpinned by sustained domestic demand growth momentum and firmer external demand,” said the research house in a note.
Though the research house is upbeat on expected growth across the various sectors of the economy, it cautioned that the growth projections are still smaller, compared with previous years.
“Growth in the domestic-oriented industries will be supported by resilient consumer spending benefiting consumer-related activities like food products, as well as firm growth in the construction-related activities.”
Services growth is also expected to be slower this year than last year as the sector’s expansion is underpinned by consumption-related services, such as retail trade, food and beverages and accommodation and other services-related areas.
However, a major dampener on the overall services sector growth this year is finance and insurance on expectation of moderate loan growth.
Though the research house is concerned of the faster inflation rate, it is aware that there has not been a change in the budget deficit target, which stood at minus three per cent of the GDP.
“Inflation rate forecast for this year raised to three to four per cent, from two to three per cent previously, which largely reflect the impact of firmer commodity prices like crude oil and raw materials, especially on domestic fuel and food prices,” it said.
“Therefore, the underlying or core inflation is expected to increase only moderately.”
Maybank IB expects the next budget deficit target only comes next year, and not this year.
“Unless there is a ‘budget recalibration’ in between the official budget announcements like what happened to the 2015 Budget and the 2016 Budget, following the changes in the official crude oil price assumptions, the next review on the 2017 Budget balance forecast will be held when the 2018 Budget is tabled,” it said.
Maybank Investment Bank is upbeat on expected growth across the various sectors of the local economy, however, it cautions growth projections are smaller, compared with previous years.