KUALA LUMPUR: The Asian Development Bank has maintained its 4.7 per cent growth outlook for Malaysia this year but expects the economy to moderate slightly next year.
In its latest Asian Development Outlook 2015, the bank expects the second half of the year to slow through the second half.
"Private consumption faces headwinds from sagging consumer confidence, the new tax on goods and services, slowing growth in credit to households, and signs of softening in the labour market," it said.
Business sentiment has been hurt by lacklustre prospects for exports, a sharp depreciation of the ringgit, a slide in stock prices, and spare manufacturing capacity.
Malaysia is likely to record a 4.9 per cent growth in 2016, it said, comparing the outlook versus its 5 per cent forecast made in March.
The Manila-based ADB expects investments to strengthen in 2016, on the back of stronger growth prospects in the major industrial economies and some improvement in demand for oil and commodities.
It noted that while the government is looking to stimulate growth through fiscal policy, it is constrained by its pledge to narrow the budget deficit.
Concerns about high household debt and capital outflows could weigh against easing interest rates, it added.