CREDIT SUISSE REVISES UPWARDS MALAYSIA’S 2018 GDP FORECAST

KUALA LUMPUR: Credit Suisse expects Malaysia’s gross domestic product (GDP) growth for next year to surprise on the upside and has revised its forecast to 5.8 per cent from 5.2 per cent.

“This is due partly to the stronger-than-anticipated thirdquarter GDP results.

“But, more importantly (the forecast) also incorporates the recent rise in oil prices, which will feed positively into investment and consumption, together with 2018 Budget measures to support spending,” said economist Michael Wan in Credit Suisse’s latest quarterly report on emerging markets.

The 2018 budget measures include tax cuts, initiatives to support affordable house ownership and a slight increase in subsidy spending.

Credit Suisse said regional exports should also remain strong next year, which would benefit Malaysia.

On the interest rate outlook for Malaysia, Wan expects Bank Negara Malaysia to raise rates by 25 basis points to 3.25 per cent in the first quarter of next year.

“The vast majority of the rise in the headline consumer price index this year was driven by oilrelated items, together with past subsidy adjustments such as (that for) cooking oil,” he said, adding that core inflation in Malaysia had risen gradually.

Wan added that several factors had given “comfort” that the economy still had some spare capacity.

“Firstly, unemployment rates continue to be elevated and this should limit pass-through of stronger growth and domestic demand to wage pressures.

“Secondly, credit growth remains low, with households still deleveraging.

“Thirdly, the external balances look stronger with the current account surplus and foreign reserves rising,” he said.

Moving forward, Wan expects some pick-up in credit growth, but it would be nowhere near rates that may prompt the central bank to decide on further rate hikes next year.

The current account is also expected to see some upside surprises. “We expect the current account surplus to rise to US$11.5 billion (RM47 billion) next year, up from an estimated US$9.9 billion this year (3.1 per cent of GDP for this year and next year),” said Wan. This compares with a consensus expectation of a US$7.5 billion rise next year.

Credit Suisse has lowered US dollar-ringgit pair forecast to 4.00 in three months and 3.80 in 12 months. Rupa Damodaran