BNM: Malaysia’s economy set for 5.5% growth in 2018

KUALA LUMPUR:

Malaysia’s economic growth is set to moderate this year from a three-year high in 2017, but still post a solid performance on the back of strong domestic demand, with the government forecasting growth of as much as 5.5%.

Gross domestic product rose 5.9% in the fourth quarter last year from the year before, Bank Negara Malaysia (BNM) said on Wednesday in Kuala Lumpur, slightly above the median estimate of 5.8% in a Bloomberg survey. The economy expanded 5.9% in 2017.

The economy has benefited from an export boom, a stable labour market and Prime Minister Najib Razak’s cash handouts to low-income earners, which have helped to underpin consumer spending in the Southeast Asian nation.

Public spending on infrastructure projects have also added jobs and boosted investment. .

“Growth in 2018 will moderate slightly, but it will still be a good and solid year,” said Edward Lee, chief economist for Southeast Asia at Standard Chartered Plc in Singapore.

“The ongoing infrastructure projects will support investment and external demand will remain healthy, but a bit slower than last year.”

Stronger growth since last year has fueled inflation concerns and prompted BNM to raise interest rates in January for the first time since 2014.

The central bank on Wednesday said growth this year will remain favourable, with domestic demand being a key driver.

“The expected faster expansion in global growth would continue to benefit Malaysia’s exports, with positive spillovers to the domestic economic activity,” the BNM said.

“Headline inflation is expected to moderate in 2018, reflecting a smaller contribution from global cost factors and a stronger ringgit compared to 2017.”

Meanwhile, Tamara Henderson of Bloomberg Economics said the risk that BNM tightens again this year has eased a bit.

“Investment growth in fourth quarter was soft. Plus, there are substantial headwinds for investment in 2018,” she said.

The growth recovery strengthens Najib’s position as he seeks to retain his power in a general election this year.

The ringgit has appreciated more than 3% against the dollar this year, among the best performers in Asia. The currency rose 0.3% to 3.9260 as of 4pm today.

Other details released in the BNM report were as follows:

Private sector consumption rose 7% in the fourth quarter from a year earlier.
Investment climbed 9.2%.
Public sector expenditure growth eased to 3.4%.
Exports increased 7.1%.
Imports rose 7.4%.
Service industries grew 6.2%.
Manufacturing rose 5.4%.

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BNM: Malaysia’s economy set for 5.5% growth in 2018

Bank Negara report says ongoing infrastructure projects will support investment and external demand will remain healthy, but a bit slower than last year.