Analysts see moderate GDP growth ahead
KUCHING: Analysts see moderate gross domestic product (GDP) growth ahead after weighing in the possible downside risks which comes with the transition of administration to the new Pakatan Harapan (PH) government.
Of note, on Thursday, Bank Negara Malaysia ( BNM) announced that Malaysia’s economy grew by 5.4 per cent in the first quarter of 2018 (1Q18) while on a quarter-on-quarter (qo-q) basis, Malaysia’s GDP grew 1.4 per cent, as compared with one per cent in 4Q17.
Malaysia’s GDP generally grew below consensus’ expectation of 5.6 per cent.
In it Economic Viewpoint report, Kenanga Investment Bank Bhd’s research arm (Kenanga Research) remarked: “As the change in government will likely put a damper on private investment due to policy uncertainty and disrupt public spending we see downside risks to our GDP forecast going forward.”
However, the upside to growth could possibly be derive from higher private consumption following the government’s decision to scrap the Goods and Services Tax (setting its rate at zero on June 1) and take its time to implement the sales and services tax, it highlighted.
“External factors may also weigh on growth mainly the expectation that exports would continue to slow on the back of the slowing global demand for consumer electronics especially mobile devices,” it added.
Hence, the research team revised its 2018 GDP forecast to 5.1 per cent from 5.5 per cent (5.9 per cent in 2017.
“Nonetheless, there could be offsetting factors if the government takes an aggressive approach to review major infrastructure projects.
“It then can prioritise or strategically delay projects that have high import content as it did in the 1990s. Less import could help boost net exports and support GDP growth,” Kenanga Research opined.
Meanwhile, Maybank Investment Bank Bhd’s research arm ( Maybank IB Research) maintained its 5.3 per cent real GDP growth forecast.
However, it adjusted the components of growth to take into account of 1Q18 numbers and the expected economic impact of PH Government implementing its first 100-day promises in the election manifesto.
“On the supply side, we raised the forecast for services growth (to 6.6 per cent from 5.9 per cent); cut the growth projections for manufacturing to (5.1 per cent from 5.8 per cent), agriculture (to three per cent from 3.8 per cent); and construction to (4.5 per cent from seven per cent); while maintaining mining growth (1.3 per cent). Turn to Page B2, Col 1