Growth seen moderating in the second half
Economic think tank expects growth to moderate to 5.4% in H2
KUALA LUMPUR: Malaysia’s economic growth is likely to moderate in the second half of 2017 (2H17), largely due to a high base effect in total exports value, according to Socio Economic Research Centre (SERC).
The economic think tank’s executive director Lee Heng Guie said the country’s gross domestic product (GDP) is expected to grow by 5.4% in 2H17, compared with 5.7% in the first six months of this year.
For the full year, he sees Malaysia’s GDP growing by 5.5% in 2017.
SERC’s GDP forecast for 2017 is higher than the World Bank’s and the International Monetary Fund’s upwardly revised estimates of 5.2% and 4.8% respectively.
The Asian Development Bank had also upgraded its 2017 growth outlook for Malaysia to 4.7%.
“We expect the GDP to grow by 5.5% in the third quarter and 5.3% in the fourth quarter this year, effectively bringing the full-year forecast to 5.5%.
“Medium term growth prospects remain positive as the Malaysian economy is gaining ground, following the dissipating headwinds of the past two years.
“However, the growth of domestic economic activities is anticipated to slightly moderate moving forward, partly because total exports may grow at a slower pace in 2 H 17.
“That said, exports growth momentum will likely continue.
“Exports have expanded by 21.5% in August and 30.9% in July, underpinned by continued broadbased recovery in global trade and stable commodity prices,” said Lee.
He spoke to reporters after SERC’s quarterly economic outlook briefing yesterday.
As for its GDP forecast for 2018, SERC predicts the domestic economy to expand by 5.1%, slightly slower than this year.
Domestic demand will remain dominant in driving the economy moving forward, with the services, manufacturing and construction sectors being key drivers of growth.
When asked whether Malaysians’ purchasing power has improved in tandem with the improving macro- economic conditions, Lee said consumers’ real purchasing power has continued to shrink as cost-induced price pressures remain elevated.
“Fuel prices remain a big wild card given the recent run-up in crude oil prices.
“Headline inflation is estimated to increase by 3.9% in 2017, as compared to 2.1% last year,” he added.
Meanwhile, SERC has urged the Government to reform the domestic tax system by introducing lower rates and fewer tax brackets, in the upcoming Budget 2018.
“We hope that the Government will offer outright reduction in corporate tax rate by 1% to 23%.
“Currently, the corporate tax rate stands at 24%, one of the highest in the region.
“As for small and medium enterprises, we urge for the reduction of tax rate to 17%.
“The personal income tax rate should also be lowered by 1% to 2%, with higher tax reliefs and rebates related to children education, self-enhancement aspects and medical expenses,” said Lee.