KUALA LUMPUR: Malaysian Institute of Economic Research (MIER) has revised upward the country's gross domestic product (GDP) to 5.4 per cent from 4.8 per cent previously, this year.
Executive director Professor Emeritus Dr Zakariah Abdul Rashid said the Malaysian economy performed better than expected in the first half of this year, grew by 5.6 per cent and 5.8 per cent, in the first quarter (Q1) and second quarter (Q2), respectively, this year.
"The growth is driven primarily by domestic demand and reinforced by stronger external demand," he told reporters at a press conference after presenting MIER Malaysian Economic Outlook for the third quarter 2017 in Kuala Lumpur today.
He said domestic demand is expected to grow by 4.8 per cent with the private and public consumption growth are expected to grow at 6.1 per cent and 1.0 per cent, respectively.
"Buoyant consumer spending is attributed to stable job market, contained core inflation and strengthening ringgit.
"The surge in public investment is also supported by strong public infrastructure projects," he said.
Zakariah pointed out the share of private consumption remained buoyant at 53.5 per cent in the second quarter this year.
"Heavy reliance on private consumption as a source of growth is still a cause or concern, especially with rising household debt," he said.
He noted the gross fixed capital formation is revised upward to grow by 3.9 per cent.
On the growth in exports of goods and services as well as the import growth for this year are revised upwards to 13.4 per cent and 13.6 per cent, respectively spurred by better-than-expected global demand.
"The growth projection for 2018 is maintained at a range between 4.7 per cent and 5.3 per cent, as of now while awaiting fresh leads," he added.
He said the headline consumer inflation this year is projected to be 3.8 per cent and moderated to 3.0 per cent next year.
On the upcoming budget wishlish, Zakariah believes the government would address the issue of cost of living with the possibility of increasing the household income.
"The high cost of living is caused by insufficient income from household.
"We expect through reduction in income and corporate taxes would help to increase the household income," he said.
He said the government would have to do it slowly and steadily to realise it but it has to forgo some of the stream of revenues, citing that the public sector income such as oil and gas revenue is limited.
"The goods and services tax (GST) is supplementing the limited supply of revenues stream from oil and gas," he said.
Zakariah added it is important to increase workers salary to address the problem of low household income.
"The government also wants to improve its public sector efficiency and to provide better wages," he said.
On another note, MIER indicated the crude oil prices is expected to trade at US$55 per barrel this year and US$60 per barrel in 2018.
"Good compliance among Organisation of Petroleum Exporting Countries (OPEC) and some non-OPEC in first half this year prices on uptrend.
"The average price (Brent) from January- August this yer is traded around US$54 per barrel," he said.
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