Malaysia growth likely to be higher at 5-5.5pc
KUALA LUMPUR: Public Investment Bank Bhd (PublicInvest) has raised Malaysia’s economic growth forecast this year to between five and 5.5 per cent.
PublicInvest said the country was expected to benefit from the low base last year, banking on the re-acceleration of gross exports that would give the nation an added lift.
“We foresee upside risks to our forecast along with those of the central bank and street estimates. At this juncture, the external environment has improved and we don’t foresee headwinds that could derail the country’s growth trajectory,” it said.
PublicInvest said the Malaysian economy was on firmer footing after delivering first-half gross domestic product growth of 5.7 per cent, compared with four per cent in the same period last year.
“The gain to 5.7 per cent was well above consensus of 4.7 per cent in the first half and central bank’s projections of between 4.3 and 4.8 per cent.
“We foresee upside risks to respective forecasts. Malaysia’s growth trajectory steadied in the second quarter after advancing by 5.8 per cent year-on-year, compared with four per cent in the same period a year ago,” it said.
PublicInvest said the aggregate demand was lifted by private consumption and investment with government consumption, giving it an added push.
“The re-acceleration of global trade also gave Malaysia a welcome boost. Net exports increased by 1.4 per cent in the second quarter, compared with 1.2 per cent shrinkage in the same period last year,” it noted.
On the monetary outlook this year, PublicInvest expects steady Overnight Policy Rate (OPR) and does not foresee risks to growth at this juncture.
“The pressure to inflation is likely to be transitory in nature. Given that, we don’t foresee the need for OPR to be adjusted either way as it is seen as accommodative and conducive for the economy,” it said.
PublicInvest said Malaysia had a comfortable monetary space, which could be unleashed should the external environment turn for the worse.
“Therefore, we opine that OPR is likely to be maintained at three per cent throughout the year.”
It said the headline inflation was most likely to be higher for the year, induced by higher crude oil prices.
As inflation is likely to be costdriven, PublicInvest does not foresee the probability of Bank Negara Malaysia’s intervening to clamp prices.
“In any case, we expect core inflation to remain stable and will leave our expectations unchanged for now,” it said.