May­bank IB main­tains 4.4pc fore­cast

New Straits Times - - Business -

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.

BLOOMBERG PIC

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.

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