Tough to hit Dr M’s 5% GDP target, says think tank

SERC executive director Lee Heng Guie says it will be challenging to achieve 5% GDP growth.

KUALA LUMPUR: A research think tank today downplayed the likelihood of Malaysia achieving a gross domestic product growth of above 5% as projected by Prime Minister Dr Mahathir Mohamad.

Socio-Economic Research Centre (SERC) executive director Lee Heng Guie, who previously forecast GDP growth at between 4.5% and 4.7%, said he was sticking to those figures for the year.

“To hit 5% will be quite challenging, given that we started the quarter at 4.5%,” he said, adding that external factors such as the escalation of the US-China trade war will present risks to GDP growth.

He said SERC had forecast GDP growth at 4.6% for the second quarter.

At the recent Asean Business Summit in Bangkok, Thailand, Mahathir said Malaysia’s GDP could grow to above 5%.

He said the smooth transition of power in Putrajaya had enabled the government to continue projects from the previous administration and to use new and existing strategies.

He also cited the sharp 0.4% drop in private investment growth in the first quarter of 2019.

Lee previously voiced concern over the drop in the growth of private investments to 4.5% in 2018 from 9.3% in 2017.

Another challenge, he said, was the export sector which had declined 0.2% year-on-year in the first four months of the year.

“Although April exports grew 1.1%, this is still a moderate figure,” he said at the briefing on SERC’s quarterly economy tracker.

On inflation, Lee said SERC expects headline inflation to average between 1% and 1.5% for 2019 as domestic factors are expected to see costs passed to consumers.

He said these domestic factors include the increase in prices of soft drinks due to soda tax, higher electricity surcharges for businesses and a potential increase in food prices.