Malaysia To Record Moderate Economic Growth In 2017 -- UOB Malaysia

KUALA LUMPUR, Nov 10 (Bernama) -- Malaysia's gross domestic product (GDP) is expected to expand moderately from the 4.2 per cent forecast for this year to 4.5 per cent in 2017, fuelled primarily by domestic consumer spending. United Overseas Bank Malaysia (UOB Malaysia) economist Julia Goh said in addition to domestic consumption growth, the economy was expected to benefit from foreign direct investment inflows, resulting from the large pipeline of infrastructure projects over the next five years. "Both public and private sector consumption currently accounts for two-thirds of Malaysia's GDP. "The trend is expected to continue into 2017, supported by new government initiatives, tourism and stable unemployment rate," she said during a media briefing. She said stable unemployment rates and high labour participation were leading to Malaysia's domestic consumption growth as mediocre global growth conditions and global geo-political events would continue to pose downside risks to Malaysia's growth path. "The potential effects from the US presidential transition, the UK's referendum to exit the European Union (EU), upcoming elections in the EU and the pace of US Federal Reserve interest rate normalisation policy, could weigh on Malaysia's growth," she said. In the midst of these global challenges, Goh said, Malaysia would have to carefully manage the balance between monetary and fiscal measures to support growth, ensure stable inflation, manage financial risks, and maintain fiscal prudence. In view of this, she said Bank Negara Malaysia (Malaysia's Central Bank) would likely maintain key interest rate at three per cent in the next policy meeting on Nov 23, premised on a forecast of a GDP growth of four per cent in the third quarter of this year. However, she sees a potential 25 basis points cut in key interest rate in the next six months, depending on developments in the economy. "As of now, due to the Budget 2017 stimulus measures to support consumption spending and economic growth, Bank Negara (Central Bank) could afford to adopt a wait-and-see approach in its interest rate policy making," she said. As for the ringgit, she said the local currency was expected to trade higher to about 4.08 against the US dollar by mid-2017, supported by stable oil prices, a return of confidence following the US presidential election and the US Federal Reserve's gradual approach to raising interest rates. By end of 2016, she said the ringgit was expected to trade at 4.15 against the US dollar. -- BERNAMA