Real GDP to grow at more moderate, healthy pace of 5.2 per cent
KUALA LUMPUR: RHB Research Institute Sdn Bhd (RHB Research) expects Malaysia real gross domestic product (GDP) to grow at a more moderate but healthy pace of 5.2 per cent in 2018.
According to the research firm, the Malaysian economy grew at a robust pace in the JanuarySeptember period.
“It was supported by a continued surge in exports, which led to a strong increase in domestic demand,” the research house said.
“Looking forward, we expect real GDP to grow at a more moderate but healthy pace of 5.2 per cent in 2018 from the +5.6 per cent estimated for 2017.
“This is on the back of slower exports, due partly to higher base in 2017 and a slowdown in public spending - in line with the Government’s fiscal consolidation drive.
“However, growth is likely to remain supported by resilient domestic demand, as the exports would continue to expand and trickle down to consumer spending and private investments.”
Domestic demand is expected by RHB Research to hold up in 2018, as the trickle-down effect from sustained external activities would continue to be felt and become more broadbased.
The research house highlighted that private consumption is expected to remain strong supported by employment gains and income - while private investments are expected to be lifted by implementations of mega infrastructure projects and investments in manufacturing and services.
Meanwhile, RHB Research forecasted real exports to grow at a sustained pace of 5.6 per cent in 2018, albeit slower from the 8.8 per cent estimate in 2017.
“This is on account of more moderate demand for electrical and electronics (E&E) shipments, as well as non-E&E and commodity export products,” it said.
On the current account surplus in the balance of payments in 2018, it is envisaged by RHB Research to widen to 2.7 per cent of GDP in 2018.
The research house noted that this is from a surplus of 2.5 per cent of GDP estimated for 2017 due to a wider merchandise balance and smaller deficit in the transfers account.
As for the headline inflation rate, RHB Research noted that it is likely to ease off, but stay elevated in 2018 on the back of relatively stable fuel prices.
“However, it ought to be partly mitigated by the demand-pull effect from resilient domestic demand and a gradual removal of gas subsidies,” the research house said.
Bank Negara Malaysia (BNM), in RHB Research’s view, will likely hike the Overnight Policy Rate by 25 basis points in 2018 on account of an elevated inflation rate while Malaysia’s economic growth continues to sustain at a reasonably strong pace.
“This is also in tandem with major central banks’ moves to tighten monetary policy and a change in BNM’s stance to a hawkish tone in its recent monetary policy statement.”