Q3 GDP growth should hold off OPR cut

The Sun (Malaysia) - - MEDIA & MARKETING - BY EE ANN NEE

KUALA LUMPUR: The strong third quar­ter gross do­mes­tic prod­uct (GDP) an­nu­alised growth of 4.3% should hold off any fur­ther in­ter­est rate cuts by Bank Ne­gara Malaysia (BNM) for the rest of the year, opined econ­o­mists.

“As such, we are re­vis­ing our OPR (Overnight Pol­icy Rate) ex­pec­ta­tion from 2.75% to 3.00% by year-end 2016, while re­main­ing one rate cut next year which will lead the bench­mark in­ter­est rate to end 2017 at 2.75%,” MIDF Re­search said in a re­port fol­low­ing the an­nounce­ment of the third quar­ter GDP growth last Fri­day.

The re­search house is also re­vis­ing its GDP growth fore­cast for 2016 from 4.0% to 4.1% and fourth quar­ter GDP growth from 3.8% to 4.0%. At the same time, it is ex­pect­ing Malaysia’s econ­omy to grow by 4.3% in 2017.

“At the mo­ment, there are signs of bet­ter global trade ac­tiv­ity next year, though we re­main cau­tious with any pos­si­ble pro­tec­tion­ism pol­icy set up by pres­i­dent-elect Don­ald Trump as he has promised in his man­i­festo,” said MIDF Re­search.

The third quar­ter GDP growth was un­der­pinned mainly by con­tin­ued ex­pan­sion in pri­vate sec­tor spend­ing and ad­di­tional sup­port from net ex­ports. Do­mes­tic de­mand, par­tic­u­larly pri­vate sec­tor ac­tiv­ity, will con­tinue to be the key driver of growth.

While do­mes­tic con­di­tions re­main re­silient, un­cer­tain­ties in the ex­ter­nal en­vi­ron­ment may pose down­side risks to Malaysia’s growth prospects.

BNM gov­er­nor Datuk Muham­mad Ibrahim said it is now too early to as­sess the im­pact of Trump’s vic­tory in the US pres­i­den­tial elec­tion on Malaysia’s econ­omy.

“As the US poli­cies be­come more ap­par­ent, we will do the nec­es­sary changes,” he told a press con­fer­ence af­ter an­nounc­ing Malaysia’s third quar­ter eco­nomic per­for­mance.

As an econ­omy, he said, Malaysia must be re­silient enough to ab­sorb any ex­ter­nal shock.

He added that the coun­try has al­ways been open to trade, the process of glob­al­i­sa­tion and sup­port­ive of trade deals. “We’ve pre­pared our in­dus­tries and peo­ple for all the chal­lenges brought about by in­creased glob­al­i­sa­tion.”

Muham­mad said the next Mon­e­tary Pol­icy Com­mit­tee meet­ing (on Nov 23) will look at the num­bers and pos­si­ble im­pact of the out­come of the US pres­i­den­tial elec­tion.

BNM said the Malaysian econ­omy, even with­out the Trans-Pa­cific Part­ner­ship (TPP), has con­tin­ued to per­form well. If TPP comes into play, it will be a plus for the econ­omy, it added.

Muham­mad (right) at the press con­fer­ence to an­nounce Malaysia’s third quar­ter eco­nomic per­for­mance in Kuala Lumpur on Fri­day.

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