Monday, 9 July 2018

(NST) Malaysia's GDP forecast at 5.1pc in 2018: Maybank IB Research

KUALA LUMPUR: Malaysia’s near-term growth outlook is fluid as domestic political events add to external developments, Maybank IB Research says in its latest report.

In the report, which covers the outlook for second half of 2018, the research firm trimmed 2018 gross domestic product (GDP) growth forecast to 5.1 per cent from 5.3 per cent previously, taking into consideration the year-to-date data and the impact of measures announced by the new government.

“We see growth moderating further to 4.9 per cent in 2019 given the outlook of slower global economic growth that will affect Malaysia’s external trade growth performance, as well as the implications of the new government’s policies on the dynamics of domestic demand growth.”

Maybank IB Research also revised down its end-2018 KLCI target to 1,750 from 1,840 previously, and expected range-bound trading for 2H 2018, as well as optimism from Budget 2019 to drive the KLCI higher in the last two months.

“Thematics will centre around regulatory risk, and growth. Our observation is the new government is strongly committed in strengthening its finances and stepping up on governance, accountability and transparency; we expect this to lift investors’ confidence over time,” it added.

The research house said consumer spending would be a key driver of 2018-2019 growth, while maintaining its May 2018 upgrade in this year’s consumer spending growth forecast to 7.3 per cent.

The forecast reflects additional boost to disposable income and purchasing power from the implementation of consumer-friendly measures by the government such as the zero-rated Goods & Services Tax (GST) effective June 1, 2018 and the fuel price subsidy until end-2018 for RON95 petrol and diesel.

“We anticipate a change in the current “blanket” fuel price subsidy to a “targeted” system next year. We see prudent government spending growth to maintain fiscal discipline via sub-three per cent budget deficit to GDP ratio.

“Investment growth will be subdued mainly due to the impact of the reviews and cancellation of major infrastructure projects.”

Meanwhile, Maybank IB Research does not expect any change in the overnight policy rate (OPR) at 3.25 per cent until end-2019 as it expects Bank Negara’s monetary policy bias to lean towards supporting growth.

It also sees the US dollar/ringgit stabilising over the next 18 months to about RM4.03 at end 2018 and RM3.90 at end 2019.

The research house said it expects world economic growth to be at 3.9 per cent in 2018, implying slight moderation in 2H 2018 after the estimated growth of 4.0 per cent year-on-year (YoY) in first-half 2018.

“With the deceleration to gain momentum in 2019, we forecast the global economy to expand at a slower pace of 3.6 per cent. This takes a cue from the latest reading in the global composite Purchasing Managers' Index (PMI), a lead indicator on global real GDP growth, which showed that the PMI is “plateauing”, signaling global economic growth has peaked or is peaking.”