UOB EXPECTS 4.4-4.5PC GDP EXPANSION

Sentiment more positive and ringgit value has improved, says economist

RUPA DAMODARAN

KUALA LUMPUR rupabanerji@mediaprima.com.my

MALAYSIA’S economy is on the mend and likely grew between 4.4 and 4.5 per cent in the first quarter of this year, says UOB Bank economist Julia Goh.

Already, sentiments are becoming more positive while the ringgit has also caught up with some of the regional currencies versus the US dollar.

“In the near term, there will be (upside) improvements in the gross domestic product (GDP) if exports continue to outperform as it did in the first three months of the year,” she told a media briefing, here, yesterday.

Against a backdrop of an improving global economy and broad-based demand, Malaysian economy has bottomed out and growth is picking up. Downside risks could emanate if commodity prices go south, she added.

Foreign selling of bonds has abated and now there is buyback of Malaysian Government Securities (MGS), which is a reflection of an improvement in foreign sentiment.

In April, foreign bond buying totalled RM6.8 billion after five months of selling while MGS attracted a total of RM5.7 billion. Equities also saw a comeback of foreign interest since early this year, providing the FTSE Bursa Malaysia KLCI a good run.

“The ringgit’s improvement was aided by the selling abating,” she said, adding that the ringgit was projected to improve to RM4.30 against US dollar by year-end.

Although inflationary pressures spiked in recent months, Goh said the pressures were transient in nature and would dip in the second half.

In terms of ringgit and regional currencies outlook, she said there was room for further appreciation although another risk of a stronger dollar might arise towards year-end.

On the outlook for the Overnight Policy Rate, UOB expects the rate to remain unchanged for the rest of the year, mostly due to an improvement in the GDP numbers.

The monetary policy committee will issue a statement on Friday.

Goh also projected the current account surplus to be between 1.5 and two per cent this year.

Strong foreign direct investments annually have helped buffer the balance of payments and foreign reserves despite the concerns about portfolio capital outflows in the first quarter.