MIDF Investment Expects GDP Of 4.3 Pct In 2017

KUALA LUMPUR, Dec 15 (Bernama) -- MIDF Investment expects Malaysia's gross domestic product (GDP) growth to increase slightly in 2017 to 4.3 per cent from the 4.1 per cent estimated for 2016. The improvement is based on the prospects of improved trade activity next year, while acknowledging the threats posed by US President-elect Donald Trump's proclivity towards protectionist policies, it added. "We have outlined two major drivers that can have a positive or negative impact on our domestic economy, which is the recovery in China's economy and Trump's trade policies," Chief Economist, Dr Kamaruddin Mohd Nor told a media briefing on the market and economic outlook for 2017 here Thursday. He added that China's economy had stabilised over the last three quarters at 6.7 per cent due to fiscal intervention, as well as monetary policies, while likely to strengthen further moving forward. "China has been a major trading partner and contributes between 13 per cent and 15 per cent to Malaysia's total trade. Positive recovery in our trading partners will provide a boost to the domestic economy," said Kamaruddin. He, however, did not foresee a significant decline in trade between Malaysia and the US. "There will be a continuation of trade policies in 2016 next year, even though there are talks of protectionism. As far as 2017 is concerned, we don't think there is any material impact in trade policy," he said. Kamaruddin said the market would also be on the lookout as to the pace of normalisation of US interest rates. "We are expecting two to three rounds of US interest rates hikes in 2017. It will have an implication on fund inflows to emerging markets, including Malaysia," he added. For 2017, MIDF Investment expects a better trade performance with growth in total exports of 3.0 per cent, supported by the positive recovery momentum in China's economy and stronger consumption by the US. In tandem with the weaker ringgit, Malaysia is expected to enjoy a higher trade balance, which would be a catalyst for a stronger GDP next year. It pointed out that the main risk towards Malaysia's growth lies not with protectionism, but with import substitution. Meanwhile, MIDF Investment expects the ringgit/US dollar exchange rate to average RM4.20 for 2017 from RM4.35 by end-2016, while estimating an average Brent Crude oil price of US$50 per barrel in 2017. (US$1 = RM4.46) The inflation rate is expected to creep up to 2.8 per cent in 2017, from an estimated 2.3 per cent in 2016. This is attributable mainly to higher pump prices in 2017, which is estimated to average at US$0.43 (RM1.95) per litre. On the overnight policy rate (OPR), MIDF Investment said any move towards an easier monetary policy is unlikely to be aggressive. It added that the OPR is expected to be reduced by at most, 25 basis points. -- BERNAMA