KUALA LUMPUR: Public Investment Bank Bhd has raised Malaysia’s economic growth forecast this year to between 5 per cent and 5.5 per cent.
PublicInvest said the country is expected to benefit from the low base in 2016, banking on the re-acceleration of gross exports that would give the nation an added lift.
“We foresee upside risks to our forecast along with those of the central bank and street estimates. At this juncture, the external environment has improved and we don’t foresee headwinds that could derail the country’s growth trajectory,” it said.
The firm added the Malaysian economy is on firmer footing after delivering first-half (1H) 2017 GDP growth of 5.7 per cent compared to 4.0 per cent in the same period last year.
“The gain to 5.7 per cent was well above consensus of 4.7 per cent in 1H this year, and central bank’s projections between 4.3 per cent and 4.8 per cent.
“We foresee upside risks to respective forecasts. Malaysia’s growth trajectory steadied in second-quarter (Q2) 2017 after advancing by 5.8 per cent year-on-year (YoY) compared to 4.0 per cent in the same period a year ago,” it said.
The research house said the aggregate demand was lifted by private consumption and investment with government consumption giving the added push.
“The re-acceleration of global trade also gave Malaysia a welcome boost. Net exports increased by 1.4 per cent in Q2 this year compared to 1.2 per cent shrinkage in the same period last year,” it noted.
On the monetary outlook this year, PublicInvest expects steady overnight policy rate (OPR) and would not foresee risks to growth at this juncture.
“The pressure to inflation is likely to be transitory in nature. Given that, we don’t foresee the need for OPR to be adjusted either way as it seen as accommodative and conducive for the economy,” it said.
It added that Malaysia has a comfortable monetary space, which could be unleashed should the external environment turn for the worse. “Therefore, we opine that OPR is likely to be maintained at three per cent throughout the year.”
PublicInvest said the headline inflation is most likely to be higher for the year, induced by higher crude oil prices.
As inflation is likely to be cost driven, it does not foresee the probability of Bank Negara Malaysia intervening to clamp prices.
“In any case, we expect core inflation to remain stable and will leave our expectations unchanged for now,” it said.