Malaysia to retain 4.9 pct growth amid ‘adjustment period’
KUCHING: The overall economic growth momentum for Malaysia in 2018 is expected to remain resilient at 4.9 per cent, moderately lower than our initially forecasted 5.2 per cent, on the back of robust private consumption and slowing import activity, RAM Ratings observed.
It pointed out that the big reveal of the government’s key fiscal policy initiatives and direction going forward, and the renewed longer-term development policies of the revamped 11th Malaysia Plan after its mid-term review, would help provide more guidance on the medium-term economic growth trajectory.
“The first 100 days in office was just the start of what seems to be a period of re-adjustment for the economy and managing this will require a careful balancing act by both policy makers and businesses alike,” said RAM’s head of Research, Kristina Fong, in a press statement.
RAM Ratings expected private consumption to continue to be the driving force for domestic demand this year with growth forecasted at 7.4 per cent, as private investment is set to slow.
“Infrastructure project rationalisation has come at a time of moderating capacity building activities, as shown by insights from our quarterly RAM Business Confidence Index (RAM BCI) which indicate reduced impetus for marginal investment activity as capacity constraints become less binding.
“As such, private investment growth is expected to be less robust than anticipated, coming in at a more muted 3.9 per cent compared to our initial forecast of 8.3 per cent,” it added.
With diminished incremental impetus for industrialised economies to invest after growing from a low base the previous year and a
The first 100 days in office was just the start of what seems to be a period of readjustment for the economy and managing this will require a careful balancing act by both policy makers and businesses alike.
corresponding ramp-up in restocking activities, the ratings agency expected export growth to veer towards a slower year without the additional distraction of tit-for-tat trade retaliation.
“As such, export growth is envis- aged to clock in below our initial forecast (of 4.2 per cent) at 2.8 per cent in 2018,” it said.
It noted that potential benefits from trade diversion were only expected in the medium term after an adjustment period for global value chains and would be dependent on future domestic industrial and investment policies.
“Specifically, Malaysia stands to gain from potential trade diversion stemming from ‘Part 2’ of the US$50 billion Trump tariffs effective from August 23, which are heavily concentrated in chemical and technology-related goods.
“Conversely, minimal trade diversion benefits are expected from ‘Part 1’ and the RM50 billion worth of Chinese retaliatory tariffs due to come into effect soon,” RAM Ratings said.
Kristina Fong, RAM’s head of Research