BNM: Malaysia’s GDP to grow between 4.3% and 4.8% in 2019

Domestic demand will remain the anchor of growth, underpinned by continued expansion in private sector activity


The Malaysian economy is expected to sustain its growth momentum and expand between 4.3% and 4.8% in 2019, compared to 4.7% in 2018, against the backdrop of a challenging global environment.

Bank Negara Malaysia (BNM) in its 2018 Annual Report released yesterday stated that domestic demand will remain the anchor of growth, underpinned by continued expansion in private sector activity.

“Private consumption growth is expected to moderate, but remain firm, supported by stable labour market conditions and continued wage growth.

“The implementation of several government measures, particularly aim at alleviating rising cost of living, is expected to further support consumption spending, especially by lower-income households,” the central bank noted.

It added that private investment activity will be supported by the implementation of ongoing multi- year projects, particularly in the manufacturing and services sectors.

The normalisation of de-stocking activities by firms after the strong demand during the tax holiday period in 2018 will serve as an additional support to growth.

However, public sector expenditure is expected to weigh on growth. The projected contraction in public investment will be mainly due to lower investment by public corporations following the completion of large-scale projects, while the expectations for a moderate growth in public consumption reflect the continued reprioritisation of government spending.

BNM said the external sector is expected to register a more moderate growth level in 2019.

The central bank said while the export sector will soften in line with the more moderate expansion in global growth and trade activity, the country’s well-diversified export structure will sustain gross exports expansion.

Gross imports are expected to expand on account of a turnaround in intermediate and capital imports.

Overall, BNM expects the current account of the balance of payments will remain in surplus, albeit narrowing to 1.5%-2.5% of gross national income.

On the supply side, BNM expects all economic sectors to expand, with the services and manufacturing sectors remaining the key contributors to overall growth.

The mining and agriculture sectors are projected to record positive growth rates amid recovery in natural gas production and higher palm oil output.

Growth of the construction sector is expected to moderate due to the completion of large petrochemical projects in the civil engineering subsector.

Labour market conditions are expected to be stable, with continued employment and income growth underpinned by steady expansion in the services and manufacturing sectors, the annual report noted.

The unemployment rate is projected to be relatively unchanged, while headline inflation is expected to be broadly stable, with a projected annual average of 0.7%-1.7%.

The inflation projection incorporates some cost pass-through from domestic cost factors, but the upward impact will be offset by the expected lower global oil prices and the implementation of price ceilings on domestic retail fuel prices.

BNM expects the underlying inflation — as measured by core inflation — to be sustained amid the steady expansion in economic activities and in the absence of excessive demand pressure.

The central bank said Malaysia’s strong fundamentals and diversified economy will help weather global risks and vulnerabilities, while preserving macroeconomic and financial stability.

The strong fundamentals include a healthy labour market, stable inflation rate, continued surplus in the current account of the balance of payments, deep financial markets and a strong financial sector.

BNM said exchange-rate flexibility and sufficient level of international reserves further enhance the economy’s capability to withstand external shocks.

Moreover, commitment by the government to fiscal, structural and institutional reforms will contribute to an inclusive and sustainable growth going forward.