KUALA LUMPUR: The World Bank has raised its forecast for Malaysia’s 2018 Gross Domestic Prooduct (GDP) growth to 5.4 per cent from 5.2 per cent previously, on sustained high level of private sector expenditure.
The revision, the first for this year, is the fourth in a row following three upward revisions in 2017 from 4.8 per cent, 5.2 per cent and 5.8 per cent in April, October and December last year.
The World Bank said Malaysia had experienced a significant acceleration of growth at 5.9 per cent in 2017, supported by a confluence of favourable domestic and external factors.
“Malaysia’s growth is expected to remain strong in the near term, albeit at a more moderate pace compared to 2017. In aggregate, Malaysia is forecast to register an economic growth rate of 5.4 per cent in 2018, supported by the continued strength of private consumption.
“With the anticipated decline in public investment, gross fixed capital formation will be driven mainly by the expansion of private sector capital expenditure, which is expected to be sustained by the continued flows of infrastructure projects and capital investments in the manufacturing and services sectors.
“The strength of Malaysia’s export performance is expected to continue into the first half of 2018, in tandem with the ongoing cyclical upturn in global trade, although at a lower rate than the preceding year,” it said in its East Asia and Pacific Economic Update released today.
Also taken into consideration was the government’s commitment to fiscal consolidation amid a continued expectation of the fiscal deficit target of 2.8 per cent of GDP being achieved in 2018.
“Looking further ahead, Malaysia’s economy is projected to expand at 5.1 per cent in 2019 and 4.8 per cent in 2020 and is expected to achieve high-income country status at some point between 2020 and 2024,” it added.
However, the World Bank said continued uncertainties to the global outlook continue to weigh on Malaysia’s growth as the economy is vulnerable to shifts in external demand and global financial market conditions.
It said downside risks to Malaysia’s growth prospects relate mainly to the external environment. In particular, an abrupt adjustment to global financial market conditions, or weaker than expected growth in the major economies and export demand could have disproportionately negative spillovers on Malaysia, given its high level of integration with the global economy and financial markets.
“Domestically, downside risks relate primarily to the relatively high level of household and public-sector debt, as well as uncertainties surrounding Malaysia’s forthcoming general election.
“A strengthening economy offers a crucial opportunity for Malaysia to accelerate structural reforms for sustained longer-term growth and to facilitate its transition towards the achievement of high-income country status in the coming years,” it said.
The World Bank said achieving a near-balanced federal budget over the medium term would necessitate a deeper wave of reforms to enhance revenue collection and improve public sector efficiency, including the targeting efficiency of social protection programmes such as BR1M.
“Equally important is to reinforce measures to improve labour productivity and implement measures to ensure that growth is inclusive and provides access to opportunities for all citizens,” it added.