M’sian economy to continue moderating to 5.1 pct y-o-y in 2H18

KOTA KINABALU: The Malaysian economy has been projected by analysts to continue moderating to 5.1 per cent year on year (y-o-y) in the second half of 2018 (2H18), from the 5.3 per cent estimated for 1H18.

According to RHB Research Institute Sdn Bhd (RHB Research), a change of policy under the new government could also impact growth, but the research house was of the view that it would be felt more in 2019.

“As we near the end of 1H18, it now appears that the first quarter of 2018 (1Q18) may well have been the peak of the global growth cycle and growth could slow in 2H18 amid rising trade tensions.

“Furthermore, recent protectionist actions and tariff measures by the US have increased the risk of an escalation of global trade tensions.

“On balance, we project Malaysia’s real exports to slow to 5.1 per cent y-o-y in 2H18, from 5.5 per cent in 1H18,” the research house said.

RHB Research noted that domestic demand, however, is expected to grow at a resilient pace in 2H18, driven mainly by a stronger expansion in consumer spending in tandem with the zerorating of the goods and services tax (GST) effective June 1, 2018.

“Investment and public spending, however, is likely to be hit by uncertainty over the review of government expenditure and infrastructure policy, offsetting somewhat the gain from higher consumer spending.”

With private consumption, RHB Research projected it to accelerate to 6.8 per cent y-o-y in 2H18, from 6.6 per cent in 1H, resulting in 6.7 per cent growth for the full year.

The research house went on to note that the tax holiday is expected to induce consumers to spend.

“This should provide an immediate boost to consumer spending in 3Q18 – before it normalises in 4Q when the sales and services tax’s (SST) impact slowly kicks in.

“Indeed, even before the zero-rating of GST came into effect on June 1, there were retailers conducting nationwide promotions and discounts to boost sales.