ROBUST MOMENTUM
Analysts more optimistic that strong momentum will continue this year
ANALYSTS are upgrading their growth outlook for Malaysia’s economy this year following the 6.2 per cent gross domestic product expansion in the third quarter. Bank Negara Malaysia expects full-year growth to be close to the upper range of its 5.2-5.7 per cent official projection.
RESEARCH houses are revising upwards their growth outlook for Malaysia this year, following the economy’s stellar growth track over the past nine months and Bank Negara Malaysia’s latest outlook.
Growth momentum was likely to stay strong, given the 6.2 per cent growth print announced yesterday, they said.
Bank Negara governor Tan Sri Muhammad Ibrahim said the economy was likely to register growth that was close to the upper range of the official projection of 5.2 to 5.7 per cent.
Economists also expect the central bank to raise the Overnight Policy Rate (OPR), the key benchmark interest rate by 25 basis points by at least once next year.
OCBC Bank’s Barnabas Gan said the third quarter gross domestic product (GDP) showed Malaysia’s ability to accelerate further into next year.
“We remain optimistic on Malaysia’s growth into next year, especially given today’s growth print, as well as the positive spillover effects from Malaysia’s 2018 Budget, which spelt tax cuts and bonus payments to government workers, which will surely spur consumer spending into the next year,” he commented.
The research house upgraded its full-year GDP outlook to 5.5 per cent from 5.2 per cent this year.
Given the strong GDP growth of 5.9 per cent over three quarters, UOB Bank yesterday also revised its growth outlook to 5.8 per cent for this year.
Economist Julia Goh said the strong GDP performance in the third quarter was led by robust domestic demand growth of 6.6 per cent amid strength in private consumption (7.2 per cent) and private investment (7.9 per cent) and public sector spending which rachet up by 4.1 per cent.
She also pointed out that the strong pick-up in services (6.6 per cent) and manufacturing (seven per cent).
The Kuala Lumpur Sea Games effect and public holidays in the third quarter had lifted tourism and services activity, Goh added.
“Manufacturing was lifted by strong exports and domestic demand and export-oriented industries benefited from robust global demand for semiconductors and higher petroleum-related refinery activity,” she said.
UOB Bank expects the central bank to raise the rate by 25 basis points next year.
“As robust GDP and domestic demand would tilt inflation pressures higher, we see upside risk to our OPR outlook.
“We do not rule out the possibility of two rate hikes next year, provided that the growth momentum stays strong (at least five-5.5 per cent range) and demand-side inflation pressures creep higher,” said Goh.
Rating agency RAM Holdings said the recovery momentum this year had been stronger than expected amid the rebound of investments in productive capacity and external demand.
“As such GDP growth is likely to reach 5.8 per cent this year, exceeding our earlier 5.4 per cent forecast,” said economist Kristina Fong.