MIER forecasts Malaysia’s GDP to increase 4.5% this year

By NG MIN SHEN / Pic By MUHD AMIN NAHARUL

Malaysia’s economy is expected to register a 4.5% GDP growth this year, slower than the initial projection of 4.7% in 2018 due to the slowdown in external trade and global growth, said the Malaysian Institute of Economic Research (MIER).

MIER ED Emeritus professor Dr Zakariah Abdul Rashid (picture) said the slowdown in external demand would drag domestic demand, which is expected to continue driving Malaysia’s economic growth.

“The country’s high dependency on private consumption, coupled with moderating investment, is a concern for future growth, while the
government continues to adopt cautious fiscal policies amid high public debt and volatile global crude oil prices,” Zakariah said at a briefing on Malaysia’s economic outlook for the fourth quarter of 2018 (4Q18) in Kuala Lumpur yesterday.

Against the backdrop of slower global growth, MIER said the domestic economy is relying heavily on domestic demand, which it expects to expand 5.1% in 2019 on the back of a 6.4% hike in private consumption.

Zakariah said Malaysia is more likely to achieve GDP growth on the lower end of the range, given that the International Monetary Fund is expecting global growth to slow to 3.5% this year from an estimated 3.7% in 2018.

“When the world economy is growing slower, we can’t expect Malaysia to grow faster than that unless we are really competitive and have high value-added export products. But I don’t think that will happen because ours is a structural problem,” he said.

He added that as external demand and domestic demand are closely related, a strong performance in exports would lead to higher household income and employment rates — which would, in turn, drive private consumption and investment.

Inversely, a slowdown in external demand for local products would negatively impact domestic demand.

“If world trade improves after the US-China trade war ceasefire expires on March 1, 2019, then we will be ready to reap whatever benefits there are, and then we will perform better than 4.5%,” Zakariah said.

Meanwhile, headline inflation is anticipated to average at 2% in 2019 versus 1% last year, as a result of expansionary policy to support domestic demand and the weak ringgit.

MIER had previously forecast national economic growth to range between 4.5% and 5.5% in 2019, while its 2018 projection of 4.7% GDP growth was lower than the previous forecast of 5.5%.

The institute also lowered its exports and imports forecasts to 1.5% and 1.9% respectively for 2018, from 1.9% and 2.2% previously, largely due to the knock-on effect of US-China trade tensions causing a contraction for Malaysia’s manufacturing output.

For 2018, it expects economic growth to come in at 4.7%, pending the releaseof 4Q18 data, and pick up slightly in 2020 to the tune of 4.5%-5.5%.