RHB Research less optimistic on MoF’s 2019 GDP forecast
KUCHING: RHB Research Institute Sdn Bhd (RHB Research) is less optimistic than the Ministry of Finance ( MoF) on its expectation that the economy will sustain at a slightly stronger pace of 4.9 per cent in 2019.
“We are less optimistic than the ministry and expect 2019’s real growth domestic product ( GDP) growth to moderate to 4.6 per cent from the 4.8 per cent estimated for 2018,” RHB Research said in its economic view report, referring to MoF’s Economic Report 20182019.
“This is a downgrade from the five per cent we projected previously for both years.”
The research house believed the challenging global environment – amidst rising trade protectionism and global interest rates – will place a drag on growth going forward.
According to RHB Research, although the development expenditure for 2018 has been raised substantially to RM54.9 billion from the initial allocation of RM46 billion, it was mainly for the existing Light Rail Transit Line 3 ( LRT3) project, housing and Electrified Double Track Project, which could have been funded through off balance sheet spending.
RHB Research highlighted that on the back of prudent spending, the budget deficit is envisaged to narrow to 3.4 per cent of GDP in 2019 from a revised deficit of 3.7 per cent of GDP in 2018 and compared with the government’s earlier target of 2.8 per cent.
“Indeed, excluding the allocation for outstanding tax refund, the opex ( operating expenditure) is projected to contract 5.4 per cent, while the net development is projected to fall 0.5 per cent in 2019.
“This reflects the government’s commitment in consolidating its fiscal position – it is also made possible on higher investment income from government-linked companies while expenditure grows modestly.”
MoF’s current account surplus projection of two to three per cent was also in line with RHB Research’s expectation, although the research house’s forecast of three per cent of gross national income (GNI) falls on the top end of the ministry’s range.
“This comes as we expect a weaker growth in the import of goods and services due to cancellations or delays of infrastructure projects while expecting the export of travel services to recover.”
On inflation, MoF’s expectation that it will trek higher at 2.5 per cent to 3.5 per cent in 2019 was again, in line with RHB Research’s forecast of 2.5 per cent for 2019, as the research house expected the government to announce a more targeted fuel subsidy and float fuel prices.