World Bank raises Malaysia’s growth forecast
Malaysia seen to grow 5.2%, from 4.9% predicted earlier
KUALA LUMPUR: The World Bank has revised Malaysia’s 2017 gross domestic product (GDP) growth forecast upwards for the second time this year to 5.2%, primarily attributed to stronger investments and the recovery in world trade.
In its latest October 2017 edition of the East Asia and Pacific Economic Update, the World Bank raised its GDP forecast from 4.9% in June as domestic economic activities accelerated by 5.7% year-on-year during the first half of 2017. Earlier in April this year, the institution had predicted the Malaysian economy to grow by 4.3% in 2017.
World Bank Group lead economist Richard Record said at a media briefing on the update that Malaysia’s robust GDP growth in the first half of 2017 was largely underpinned by strong private-sector expenditure, with additional impetus from an improvement in external demand.
“Private consumption expanded firmly this year, supported by favourable income growth amid stable labour market conditions, and improved consumer confidence. Private investment also sustained rapid growth rates during the period, reflecting mainly continued capital spending in the manufacturing and services sectors.
“On the external front, gross exports rebounded strongly from the subdued growth experienced in 2016, supported by double-digit growth in commodity and manufactured exports,” said Record.
“Moving forward, the outlook remains positive as the Malaysian economy continues to experience broad-based growth across a range of diversified sectors. Domestic demand is expected to remain the primary anchor of growth, underpinned by robust growth in private-sector expenditure.”
Note that Malaysia posted higher-than-expected GDP growth rates of 5.6% and 5.8% in the first and second quarters.
Economic watchdogs are generally bullish on the Malaysian economy’s performance, buttressed by strong expansion in private consumption and private investment. In the latest update on its World Economic Outlook, the International Monetary Fund has upped its GDP growth projection for Malaysia in 2017 to 4.8% from 4.5% previously.
Apart from that, the Asian Development Bank has also upgraded its 2017 growth outlook for Malaysia to 4.7% from 4.4%, and indicated that the two-year slowdown in economic growth is likely to have bottomed out last year.
However, while the Malaysian economy is expected to sustain its current growth momentum into 2018 and 2019, Record indicated that the country’s economic growth may moderate in the next two years. This is in tandem with the bank’s expectation of lower capital expenditure growth in Malaysia, moving forward.
“We are forecasting Malaysia’s GDP to grow by 5% next year and 4.8% in 2019. Our prediction reflects how we are seeing the country’s macroeconomic fundamentals’ performance and the baseline scenario.
“This year’s faster-than-expected GDP growth is the result of a number of factors that might not continue in a similar trend, going forward. In the medium term, we expect China’s economic growth to moderate further and this may have an impact on Malaysia’s economy, given the significant trade relations between both countries,” he added.
Meanwhile, the World Bank has said that the ringgit remains exposed to exchange rate risk, compared to other developing economies in East Asia and the Pacific.
This was mainly due to the result of sizeable external debt in corporates and banks, albeit Bank Negara’s foreign exchange reserves appearing adequate currently.