Bank keeps growth fore­casts for M’sia

> Fur­ther clar­ity on Don­ald Trump’s poli­cies needed be­fore im­pact can be de­ter­mined

The Sun (Malaysia) - - SUNBIZ - BY EE ANN NEE

KUALA LUMPUR: United Over­seas Bank (Malaysia) Bhd (UOB Malaysia) is keep­ing its growth fore­casts for Malaysia’s gross do­mes­tic prod­uct un­changed at 4.2% in 2016 and 4.5% in 2017 de­spite the out­come of the US pres­i­den­tial elec­tion, but high­lighted that more clar­ity is needed on Pres­i­dent-Elect Don­ald Trump’s poli­cies to as­sess their pre­cise im­pact on Asia and Malaysia.

Its econ­o­mist Ju­lia Goh ( pix) said Malaysia’s econ­omy will be fu­elled pri­mar­ily by do­mes­tic con­sumer spend­ing.

“With the ex­pan­sion­ary mea­sures an­nounced in Bud­get 2017, govern­ment stim­u­lus an­nounced ear­lier in the year, the OPR (Overnight Pol­icy Rate) cut in July, we think do­mes­tic de­mand will still be the key driver of growth and these mea­sures will help to pro­vide sup­port for do­mes­tic spend­ing,” Goh told a me­dia brief­ing on the eco­nomic out­look for Malaysia here yes­ter­day.

How­ever, she said, the po­ten­tial ef­fects from the US pres­i­den­tial tran­si­tion could weigh on Malaysia’s growth. Medi­ocre global growth con­di­tions and global geopo­lit­i­cal events will con­tinue to pose down­side risks to Malaysia’s growth path.

“The big­gest un­cer­tainty for Asia is in view that dur­ing Trump’s cam­paign trail, he pledged to rene­go­ti­ate trade deals and he talked about scrapping the (Trans-Pa­cific Part­ner­ship Agree­ment), which could have di­rect im­pact on Malaysia,” said Goh.

She said if Trump is true to his words, coun­tries like China, Korea, Ja­pan, which have larger trade sur­pluses with the US, will be tar­geted with po­ten­tial tar­iffs but what Asean and Malaysia will feel is the in­di­rect ef­fect.

Goh said what po­lit­i­cal can­di­dates say in cam­paign trails and what they do in office can be dif­fer­ent and hope­fully there will be suf­fi­cient checks and bal­ances in the US Congress if Trump de­cides to lean to­wards con­tro­ver­sial ex­tremes mea­sures or poli­cies.

The ef­fect of China’s eco­nomic re­bal­anc­ing, nat­u­ral dis­as­ters and how Asia ad­justs to lower growth prospects across ad­vanced economies could also im­pact the coun­try’s do­mes­tic growth neg­a­tively.

Against the global chal­lenges, Malaysia will need to care­fully man­age the bal­ance be­tween mone­tary and fis­cal mea­sures to sup­port growth, en­sure sta­ble in­fla­tion, man­age fi­nan­cial risks and main­tain fis­cal pru­dence, Goh said.

UOB Malaysia ex­pects the ring­git to trade at 4.15 against the US dol­lar by year-end and at 4.08 by mid-2017, sup­ported by sta­ble oil prices, a re­turn of con­fi­dence fol­low­ing the US pres­i­den­tial elec­tion and the US Fed­eral Re­serve’s grad­ual ap­proach to rais­ing in­ter­est rates.

Goh ex­pects a po­ten­tial 25 ba­sis point cut in the OPR in the next six months.

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