KUALA LUMPUR: The World Bank has trimmed Malaysia’s economic growth estimate for this year to 4.2 per cent from 4.4 per cent.
This is largely due to weak crude oil prices and lower demand for exports of manufactured products, according to a report in the Nikkei Asian Review.
However, the World Bank says Malaysia’s GDP growth will likely rebound to 4.3 per cent next year, and then rise further to 4.5 per cent in 2018.
This compares with its earlier forecast of 4.5 per cent and 4.7 per cent GDP growth for the country for 2017 and 2018, respectively.
The World Bank’s chief economist for the East Asia and Pacific Region, Sudhir Shetty, was quoted as saying by The Star that 2017 and 2018 would present better prospects for Malaysia due to the anticipated recovery in the export of manufactured goods and commodity prices.
“We anticipate slightly faster trade growth and improving commodity prices,” Sudhir told the Malaysian media via a video conference from Washington DC.
“We do see oil prices beginning a slight recovery in 2017, but they are not going to get back to anywhere near the levels they were in 2014,” he was quoted as saying.
The World Bank said in its latest edition of East Asia and Pacific Economic Update that rising uncertainties over the global economic outlook could weigh on Malaysia’s growth.
Economic growth in Malaysia this year, it noted, would be driven primarily by private consumption. However, the softer labour market and rising cost of living will dampen it.
The NAR report said Malaysia’s economy grew 4.0 per cent in the second quarter, the lowest rate of growth since the third quarter of 2009, as goods exports slowed and agriculture output contracted.
The government forecasts the economy to grow between 4.0 per cent and 4.5 per cent this year, slower than last year’s 5.0 per cent expansion pace.
“Export growth is projected to remain stagnant on low commodity prices and weaker growth outlook among Malaysia’s main trading partners,” the World Bank said. That could further narrow Malaysia’s current-account surplus to 1.8 per cent in 2016 from 3.0 per cent last year, it said.
Malaysia’s exports contracted 5.3 per cent year-on-year in July, the NAR reported.
The report said that a slump in global oil prices had weighed on Malaysia’s growth and government finances. Oil and gas, which accounted for 11 per cent of Malaysia’s total exports in 2015, is a major source of revenue for the government.
The World Bank said: “Going forward, the Malaysian economy faces risks emanating mainly from external developments. They include uncertainty over the trajectory of economic growth in the global economy, and potential volatility in financial markets.”