Economists positive on M’sia’s 2H growth

by DASHVEENJIT KAUR

Malaysia’s economy may see an equally strong or record better second-half (2H) growth, rather than easing as widely anticipated, according to economists.

After an expectation-beating first-quarter (1Q) growth of 5.6%, the country’s economy is expected to continue its steady first three-month growth momentum in the subsequent quarters.

Sunway University business school’s economics professor Dr Yeah Kim Leng said in line with most advanced economies, 2H growth of at least 5% year-on-year (YoY) is achievable based on the continuing strength in global demand.

“If you look at the current global environment, you see a strengthening of global demand,” he told reporters at the sidelines of the 2017 Bank Negara Malaysia (BNM)-International Monetary Fund (IMF) Summer Conference yesterday.

“All the indicators show that most economies are in expansionary mode and, of course, that would lead to higher demand. In line with that, our export sector will likely do better in the coming months,” he added.

According to Yeah, IMF’s upgrade of the country’s growth forecast to 4.8% is also in tandem with gross domestic product (GDP) revision forecast this year.

“Although it is slightly below the market consensus of 5% for this year, the increase in IMF forecast reflects the confidence it has over the growth potential that Malaysia holds this year.”

Recent data also shows that exports and imports chalked up 21% and 27% increases respectively in the1Q.

Despite the better than expected figures, the government has maintained its full-year GDP growth forecast at a range of 4.2% to 4.8%.

Yeah further added that external demand would grow slightly firmer, which would then lead to a stronger performance in the country’s 2H.

“Everything is taking place accordingly to fit in the GDP expectations for this year.

“There is increasingly more positive outlook for Malaysia as we have done very well in the 1Q, exports have sustained and that should lead us to second-round effect of rising investment,” he said.

Another second-round effect of rising investment would also fit into the strengthening of the economy for the rest of the year.

“We are looking at a favourable global environment since IMF has also increased its growth forecast for China.

“The investment cycle is picking up in the rest of the world and that should bring a higher trade intensity in global economy,” Yeah explained.

Meanwhile, IMF research department deputy director Gian Maria Milesi-Ferretti also reckoned that the pick-up in global activity will continue to support Malaysia’s growth.

“First-quarter is always an important benchmark and Malaysia started off pretty strong.

“GDP number was impressive and that was the main reason for IMF’s upgrade in the growth forecast.

“Trade also saw a pick-up and that is a good news for a country that is a open and as integrated in the global market as Malaysia,” Milesi-Ferretti said.

He believes that Malaysia is not too dependent on oil prices anymore. “We see a successful effort to increase the sustainability of debt, which is on a downward path, and a very steady hand in monetary policy for Malaysia.

“All these end up with investors who truly believe in the credibility of the country,” he said.