BNM lowers GDP to 4.3-4.8 pct in 2019
KUCHING: Bank Negara Malaysia’s ( BNM) expects Malaysia’s economy to moderate in the global economic expansion and have lowered their GFO growth target for 2019 to be between 4.3 and 4.8 per cent from 4.7 per cent in 2018.
This is lower than the Ministry of Finance’s bullish projection of 4.9 per cent, it said in its newly published Annual Report 2018.
According to the report, elevated macro uncertainties stemming from the developing US- China trade war, political and policy direction and lower commodity prices are exerting risks to the domestic growth outlook.
However, BNM expect s Malaysia’s domestic demand to remain the key pillar of growth, particularly in private sector expenditure, and expand by 4.4 per cent in 2019, lower than the 5.6 per cent expansion recorded in 2018.
In an update by the research arm of Affin Hwang Investment Bank Bhd (AffinHwang Capital), noted that private consumption is also expected to rise by 6.6 per cent in 2019 versus 8.1 per cent in 2018 as house spending is anticipated to normalise closer to its long-term average of 6.7 per cent.
“The healthy labour market and sustained wage growth will be supportive of the growth. BNM projects growth in private investment to expand by 4.9 per cent in 2019 from 4.5 per cent in 2018, in line with our growth forecast of 5.0 per cent,” said the research arm.
Current account surplus will also narrow to RM28 billion 2019 but remain relatively healthy at 1.5 to 2.5 per cent of the gross national income (GNI). In comparison, 2018 figures reported current account surplus to be at RM33.5 billion and 2.4 per cent of GNI.
On a good note, BNM lowered its inflation target to a range from previous forecasts of 2.5 to 3.5 per cent.
And looking forwa rd, AffinHwangCapitalmaintainedits view that BNM will likely keep its monetary policy accommodative, where the OPR is anticipated to remain unchanged at 3.25 per cent throughout 2019.
“Nevertheless, BNM’s future decisions on the direction of OPR will be data- dependent,” it added. “No emerging markets, including Malaysia, can escape fully the downside risks to the global growth, especially when global GDP growth could be distorted further by prolonged protectionist policies, which may lead to disruption to the global trade channel.
“However, BNM is of the view that other measures are needed to further support and sustain domestic growth in the medium term, most pertinently structural reforms such as fiscal, structural and institutional reforms that would boost potential growth,” it added.
Agreeing with this, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) said that major central banks including the Fed and ECB are portraying cautious outlook on growth with a dovish monetary policy.
“BNM now has more room to adjust its short-term benchmark interest rate lower,” they commented while adding on that a rate cut would likely not be on the horizon at this juncture.
“While BNM has toned down its inflation expectation to 0.7 to 1.7 per cent and slashed growth forecast for 2019, we still feel that an OPR rate cut requires more data evidence that shows signs of deeper deterioration in domestic activity relative to level of moderation experienced currently, or at least a partial materialisation of the growth headwinds mentioned earlier.
“A In the absence of the aforementioned factors and barring a major external shock, we expect there is no compelling reason for BNM to cut the Overnight Policy Rate, which has remained at 3.25 per cent since it was raised in January last year,” it said.