2017 a year of recovery, private investments to spur growth

KUALA LUMPUR: Malaysia’s economy will strengthen this year, driven by a recovery in global commodity prices, while private investment is expected to expand due to the expected solid improvement of economic activities in Malaysia.

MIDF Amanah Investment Bank Bhd’sresearcharm(MIDFResearch) in an economic report said based on current macroeconomic condition, most indicators are reflecting strong and robust recovery since middle of 2016.

For instance, it noted that Malaysia’s gross domestic product (GDP) growth recorded at 5.6 per cent year-on-year (y-o-y) in the first quarter this year, the highest in two years.

It added, private investment grew at three-year’s high of 12.9 per cent y-o-y during the quarter.

“Looking at private investment’s indicators, we opine that the expenditure component will break its five consecutive years of deceleration in annual growth.

“We expect private investment to expand by 5.6 per cent in 2017 due to solid improvement of economic activities in Malaysia,” it commented.

The research team believed that the strong trade performance has positive spillover effects on Malaysia’s economy in particular on private investment.

It explained, “Based on the first quarter performance, surged in externaltradehaverestoredbusiness confidence and reinvigorating investment climate as reflected in MIER’s Second Quarter Business Confidence Index which rose above 100-threshold points during the quarter at 112.7 points.

“We also observed industrial production figures in 2017 perform better than previous year’s.

“As a result, private investment particularly investment in machinery & equipment expanded by 12.9 per cent y-o-y and 21.8 per cent y-o-y respectively in the first quarter of 2017.

“The growth in private investment recorded in the first quarter 2017 was the highest in four years.”

On the growth of private investments into Malaysia, MIDF ResearchnotedthattheInternational Monetary Fund (IMF) forecast world GDP growth to improve to 3.5 per cent in 2017 as compared to 3.2 per cent in 2016.

“We believe further investment via capital expenditure will take place especially in manufacturing and mining sectors with installation of new machineries, technologies and equipment,” it added.

Among others, import of investment and intermediate goods are indicators for private investment performance, the research team said.

“Import of capital goods as well as machinery and transport equipment are major components of investment goods.