COURTS TO EXPAND SABAH FOOTPRINT
Country’s GDP growth forecast for this year revised up again to 5.6pc
CREDIT Suisse has taken on a more upbeat outlook on Malaysia’s growth story this year and has revised its outlook upwards again, this time to 5.6 per cent from 5.1 per cent.
Its latest outlook places the research house among the top of the forecast range.
“We note that consensus gross domestic product (GDP) has been rising steadily since the start of the year, reaching five per cent from just 4.2 per cent at the start of the year,” said economist Michael Wan.
“Driving our forecast change is our view that the second quarter is likely to print stronger than most observers expect.
“This strong growth should be driven by a pick-up in consumption, government spending and also exports,” he added.
Most of the high frequency indicators we track, such as industrial production, manufacturing sales, retail activity, government spending and money supply growth, have accelerated further in the second quarter from the first quarter.
“Our model, which takes these factors into account, points to a further year-on-year pick-up in GDP to around six per cent from 5.6 per cent.”
Wan said although the market consensus expect a sharp slowdown in the second half, Credit Suisse did not think so.
This was due to the fiscal policy, public infrastructure projects and better labour market to support growth.
“The negative impact of past subsidy cuts such as on cooking oil should continue to fade over the rest of the year.
“Also the broader fiscal position will continue to be more supportive over thia year, with central government spending less contractionary this year.
“We also expect broader public infrastructure projects such as train lines and highways to support investment activity.”
Equity strategist Danny Goh sees some potential upside surprise in the construction space from mega-projects such as the East Coast Rail Link.
Wan further added that the labour market is healing, with employment growth starting to pick up and unemployment slowing over the past six months and this should support private consumption in the second half.
The research house also noted that the ringgit outlook looks more stable now, in part reflecting the central bank’s FX conversion regulations and also less bearish sentiment from bond investors. The ringgit will likely trade at RM4.25 versus the US dollar in 12 months.