KUALA LUMPUR: Malaysia’s gross domestic product (GDP) growth is expected to remain strong at five per cent in 2018 compared with 5.9 per cent estimated this year, given moderating export growth and tighter credit conditions, said the Institute of Chartered Accountants in England and Wales (ICAEW).
ICAEW Economic Advisor/Oxford Economics Lead Asia Economist Sian Fenner said synchronised recovery in global growth would continue to be supportive of exports but momentum is likely to ease over 2018 as global trade recovery enters a more mature stage and Chinese import growth cools on the back of a tightening monetary policy.
“There would be less Chinese import, therefore Malaysia’s export is going to decrease from the strong acceleration that we saw this year.
“Domestic demand is expected to remain quite resilient, particularly on investment, in infrastructure spending, while household spending should moderate a little bit but remain on quite solid footing,” she told reporters after presenting the ICAEW Southeast Asia Economic Insight for the fourth quarter of 2017, here today.
Fenner said Malaysia’s household debt servicing costs would likely increase in line with the rise in domestic rates in view of an anticipated 25 basis point hike in the overnight policy rate (OPR) which is likely to be announced by Bank Negara Malaysia (BNM) in the first quarter of 2018.
In spite of the positive economic growth outlook, inflation is expected to moderate in 2018.
Core inflation will likely edge higher next year amid robust domestic demand, with headline inflation expected to moderate to 2.9 per cent next year from an estimated 3 8 per cent.
“We expect the process of monetary policy normalisation by BNM to proceed in a gradual and well-communicated manner.
“A very gradual macro policy normalisation cycle, along with still relatively solid trends in global trade growth, expected to ensure that growth remains reasonably resilient in Malaysia and across the region,” she said, adding the country’s election, fiscal slippage risks and level of household debt would be among important things to monitor for next year.
On ringgit, Fenner said it would remain quite attractive to foreign investors amid soft US dollar and predicted the local note to be traded below the level of 4.2 against the US dollar next year. -- Bernama