StanChart Revises Malaysia's 2017 GDP To 5.4 Pct

KUALA LUMPUR, Aug 30 (Bernama) – Standard Chartered (StanChart) has revised upwards Malaysia’s gross domestic product (GDP) growth forecast to 5.4 per cent from 4.6 per cent, on the back of a much stronger-than-expected growth of 5.7 per cent in the first half of 2017 (H1). In a research note on Wednesday, the bank said it was positively surprised with the resilience of private consumption and increase in private investment, which were two key data for the first half. The bank said exports also picked up in line with its expectations, although higher imports curtailed the contribution from net exports. StanChart said robust consumer spending remained a surprise, considering that real wage growth was still in negative territory in H1, unemployment rate as of June 2017 remained elevated at 3.4 per cent while household leverage remained high. Private investment had a stellar performance in H1, with the bulk of investments likely went into machinery and equipment, boosted by ongoing infrastructure projects and a pick-up in external demand but loan growth remains subdued, it said. "Despite the strong growth in the H1 this year, we maintained our outlook for a slightly softer H2 2017, whereby growth will moderate and private consumption will ease," it said. “We remain somewhat cautious on the sustainability of this strong momentum. Loans disbursement eased in the second quarter from the first quarter (Q1), while construction projects have fallen steadily over the last few quarters,” it said. External demand, especially the robust electronics cycle, might keep growth up in H2, but some base effects might kick in during the fourth quarter, the bank said. “On balance, 2017 is shaping up to be a year of rebound after the muted 4.2 per cent GDP growth in 2016,” it said. StanChart said the strong pace of growth in H1 would increase the risk of a pick-up in core inflation, and if growth continued to surprise to the upside, expectations for a rate hike might build up. In the latest monetary policy statement in July, Malaysia’s central bank, Bank Negara Malaysia (BNM) noted “that underlying inflation (measured by core inflation) will be sustained by more robust domestic demand but is expected to remain contained.” “We think BNM is comfortable with the current accommodative monetary policy settings and maintain our view of no change in the policy rate for 2017, while keeping a watchful eye on core inflation even as headline inflation has eased since its peak in Q1,” it added. -- BERNAMA