Domestic demand to continue to steer economic activities
KUALA LUMPUR: Domestic demand will continue to steer economic activities next year when Malaysia likely charts a 4.5 to 5.5 per cent growth, says think-tank Malaysian Institute of Economic Research (Mier).
Executive director Dr Zakariah Abdul Rashid said the benign inflation level was expected to change next year on the back of high consumer spending.
MIER has maintained its 4.2 per cent growth outlook this year, saying it was led by domestic demand.
Consumption and investment will drive private sector spending, which will in turn likely improve to 6.6 per cent next year.
“Public investment is expected to (offset) shortcomings by growing at 1.4 per cent this year, a turnaround from a negative growth of one per cent last year,” he said at the two-day National Economic Outlook Conference 2017-2018 which started yesterday.
The International Monetary Fund expects the gross domestic product for Malaysia to expand by 4.6 per cent next year while the Asian Development Bank (ADB) is looking at 4.4 per cent.
The government’s growth forecast is 4 to 4.5 per cent.
Current account balance is also expected to rebound next year, as export demand improves further, said Zakariah.
On the weakness of the ringgit versus the US dollar, he said the ringgit will remain depressed which will put more pressure on Malaysian borrowers, including the government, to serve their foreign currency dominated debt.
He said the fair value of the ringgit is between 4.05 and 4.1.
At a media briefing, he said Bank Negara Malaysia’s recent measures to improve the liquidity and demand for the ringgit will also to minimise the hardship to households and businesses.
“The ringgit will return to equilibrium once the real factors set in,” he said, referring to the flow of goods and services impacted by the weakness of the currency in the face of a stronger US dollar, recent United States presidential elections as well as the crude oil prices.
“Malaysians will however to step up on their productivity and work at least 22 per cent harder since the value of ringgit has slipped to 4.4 levels compared with the earlier projections at 3.6.
He also said while the demand and supply for the ringgit from the offshore market is important, the country can survive without its speculative element.