ECONOMY TO BEAT EXPECTATIONS NEXT YEAR, RINGGIT TO STRENGTHEN AGAINST U.S. DOLLAR
Domestic demand remains key driver while external trade performance will strengthen
THE economy is likely to grow at a commendable pace next year. The gross domestic product (GDP) is expected to grow around 5.5 per cent next year, which is only slightly lower than the 5.8 per cent target for this year.
MIDF Amanah Investment Bank Bhd chief economist Dr Kamaruddin Mohd
Nor said a 5.5 per cent expansion was commendable, given the high base effect this year.
“Domestic demand will still be the key driver while external trade performance will continue to strengthen.
“Private consumption is expected to improve, supported by a stable labour market and sustained private sector wage growth,” he told NST Business yesterday.
GDP growth hit a two-year high of 5.6 per cent in the first quarter of this year after five consecutive quarters of slow growth. In the second quarter, Malaysia’s GDP grew 5.8 per cent before hitting 6.2 per cent in the third quarter, which was among the fastest in the Asian region.
Kamaruddin said multiple factors that would weigh on sentiments next year included the sustained cost of living pressure, employment opportunities, household debt and housing affordability.
“These are some of the issues affecting the bottom 40 per cent and middle 40 per cent of the income group.”
He also expected the ringgit to gradually strengthen against the US dollar next year.
“Positive macro outlook, stable commodity prices, robust external sector, positive fund flows and weakening of the US dollar are some of the key factors that will support the ringgit next year.
“The United States rate hikes will also weigh on the ringgit but we expect the effects to be mild.”
Yesterday, the ringgit rose about 0.4 per cent against the US dollar to 4.0667, from Wednesday’s close of 4.0840/0890, as the greenback dipped on falling Treasury yields.
On equity, MIDF research head Mohd Redza Abdul Rahman said the plantation sector was expected to record higher earnings next year due to the expected 10 per cent growth in exports.
“Next year, we are expecting export-oriented stocks to lead the way as we forecast exports to grow close to 10 per cent despite seeing a high base this year.
“We have a contrarian view on plantation. We think it will do well on the back of expectations of higher demand growth at four per cent (versus the consensus of two per cent). We think IOI Corp Bhd, Kuala Lumpur Kepong Bhd and TSH Resources Bhd would do well,” he added.
On Bursa Malaysia yesterday, the Plantation Index fell 38.34 points, or 0.5 per cent, to 7,869.11 points from 7,894 points on Wednesday.