The Institute of Chartered Accountants in England and Wales (ICAEW) expects Malaysia’s gross domestic product (GDP) to rose at 5.2 per cent in 2018, easing slightly from a 5.9 per cent close in 2017 on the back of slightly tighter credit conditions and moderation in export growth.
Institute of Chartered Accountants in England and Wales (ICAEW) Economic Advisor and Oxford Economics Lead Asia Economist Sian Fenner said he 2018 outlook will be determined more by the health of Malaysia’s import partners and global trade dynamics.
Further interest rate, he added, might rises following the January hike may be brought forward if a tightening labour market triggers unexpectedly strong wage growth in 2018.
ICAEW’s latest economic insight:South-East Asia report said domestic demand was expected to remain the mainstay of Malaysia’s growth this year.
“Improving labour market conditions, rising manufacturing wages and the many populist measures announced in the 2018 budget should continue to support household spending this year.
“However, household spending is likely to moderate this year as debt servicing costs increase in line with the rise in domestic borrowing rates and fading fiscal support post-election.”
The report said the outlook for investment spending is also healthy and survey shows an improvement in business conditions.
Demand for raw materials and a surge in construction applications also suggest that the pick-up in private and government infrastructure investment in 2017 is set to continue this year.
Malaysia recorded a 12.3 per cent growth in private investment for the first three quarters of 2017, almost triple that of average annual growth from 2012 to 2016.
ICAEW also predicts, the exports outlook staged an impressive recovery.
“With the signing of the CPTPP, Malaysian firms will be provided with preferential access to ten markets accounting for 13 per cent of global GDP.
“However, this positive development is dampened by the news that the EU plans to ban the use of palm oil in motor fuels from 2021. As Malaysia is the largest palm oil exporter in the world, this ban would disproportionately fall on low-income rural households.”
Looking ahead, fundamentals remain encouraging for continued private sector investment and growth in Asia with world trade growth expected to rise by 5.2 per cent in 2018 and business sentiment is high and firms are upbeat about the opportunities provided by China’s One Belt One Road initiative and the resurrected Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP) relatively muted outlook on inflation and foreign exchange.
