Wednesday, 1 March 2017

(The Star) Malaysia’s GDP seen advancing 4.4%, economy bottomed out last year

PETALING JAYA: The Malaysian economy is expected to grow by as much as 4.4% this year, a slight improvement from 2016’s 4.2%, anchored by the ongoing implementation of infrastructure projects in the country, said economists.

Socio-Economic Research Centre executive director Lee Heng Guie said Malaysia’s economic had already “bottomed out” in 2016.

“This year’s growth outlook shows a cautiously positive trend of 4.3% for this year,” he said in his presentation during Rehda Institute’s economic and business outlook conference 2017 yesterday.

“The ongoing implementation of public transportation-related infrastructure projects and continued investments in the manufacturing and services sector will help promote private investments,” he said.

Affin Hwang Investment Bank Bhd chief economist Alan Tan said he is projecting Malaysia’s 2017 real gross domestic product (GDP) growth at 4.4%, slightly below the midpoint of the official forecast of between 4% and 5%. “Downside risk lies in an unexpected slowdown in the external environment. We expect fiscal deficit to narrow sharply from -3.1% of GDP in 2016 to -3% of GDP projected for 2017,” he said. The Malaysian economy expanded 4.2% in 2016, and is expected to expand between 4% and 5% this year.

Tan said that pressure from the weaker ringgit and higher imported inflation would edge up inflation from 2.1% in 2016 to 2.7% this year.

“Despite an increase, it is still at manageable levels,” he said, adding that he expects the central bank to maintain the benchmark overnight policy rate (OPR) at 3% throughout 2017. “Sharp improvement in yields of dollar-denominated assets may risk some capital outflow from Asia back to the US, as investors also expect a sharper appreciation of the dollar against regional currencies.”

Despite the less-than-stellar outlook, Tan said Malaysia was still an attractive destination for foreign investors.

“Malaysia has good infrastructure and good labour market conditions. It has highly skilled workers and will continue to attract foreign investments.

“However, competition around the region is rising and there is a risk of Malaysia losing out, especially like labour cost. We need to upgrade our labour skills and technology to remain attractive to investors.”

On the local property market, Lee said the sector was expected to see some consolidation this year in light of the challenging economic environment.

“There is still some overhang in certain segments and oversupply in the commercial sector space,” he said, adding that the local property sector will continue its flattish trend since 2013. On the lending guidelines, Lee said there must be no compromise on creditworthiness.

“Some may say Bank Negara’s lending guidelines are too strict. This is good. We do not want a sector that is over-heated. If debt level is too high and there is a shock from unemployment, or a rise in interest rates, those who are very stretched will have problems.”