MIER hikes growth forecast to 5.4pc
Institute upgrades forecast for this year to 5.4pc on better-than-expected H1 performance
MALAYSIAN Institute of Economic Research (MIER) has revised upwards Malaysia’s gross domestic product (GDP) growth forecast for this year to 5.4 per cent from 4.8 per cent previously.
Executive director Professor Emeritus Dr Zakariah Abdul Rashid said Malaysia’s economy had performed better than expected in the first half of the year, growing 5.6 and 5.8 per cent in the first and second quarter, respectively.
“The growth was driven primarily by domestic demand and reinforced by stronger external demand,” he said at a press conference after presenting MIER’s Malaysian Economic Outlook for the third quarter, here, yesterday.
Zakariah said domestic demand was expected to grow 4.8 per cent with private and public consumption seen expanding at 6.1 and 1.0 per cent, respectively.
“Buoyant consumer spending is attributed to a stable job market, contained core inflation and strengthening ringgit.
“The surge in public investment is also supported by strong public infrastructure projects,” he said.
Zakariah said the share of private consumption remained buoyant at 53.5 per cent in the second quarter.
“Heavy reliance on private consumption as a source of growth is still a cause or concern, especially with rising household debt.”
He noted that the growth projection for gross fixed capital formation had been revised upwards to 3.9 per cent.
Export and import growth forecasts for this year have also been upgraded to 13.4 and 13.6 per cent, respectively, to be spurred by better-than-expected global demand.
“The growth projection for next year is maintained at between 4.7 and 5.3 per cent as of now while awaiting fresh leads,” he added.
Zakariah said the headline consumer inflation was expected to be at 3.8 per cent this year and moderate to 3.0 per cent next year.
On the 2018 Budget, Zakariah said he believed the government would address the rising cost of living with some measures to increase the household income of the rakyat.
“The high cost of living is caused by insufficient household income... A reduction in income and corporate taxes would help increase the household income.”
Zakariah said the government would have to reduce the taxes slowly and steadily to increase the household income of the people, but this might affect some of its revenue.
“The Goods and Services Tax is supplementing the revenues from oil and gas,” he said.
Zakariah added that it was important to increase workers’ salaries to address the low household income issue.
“The government also wants to improve its public sector efficiency and to provide better wages,” he said.
On another note, MIER expects crude oil to trade at US$55 (RM232.30) per barrel this year and US$60 per barrel next year.
Zakariah said good compliance to a production cut agreement among Organisation of the Petroleum Exporting Countries (Opec) members and some nonOpec producers in the first half of the year had helped put oil prices on the uptrend.
“The average price (Brent) from January to August this year was around US$54 per barrel,” he added.