The Tun Razak exchange project in Kuala Lumpur. The World Bank says income support measures, higher infrastructure spending and improved exports are expected to drive Malaysia’s growth this year. Bernama Photo

THE World Bank has revised upwards its growth projection for Malaysia by 0.6 percentage points to 4.9 per cent for this year, citing solid economic activities.

It also revised upwards the nation’s growth forecasts for next year and 2019 by 0.4 and 0.5 percentage points, respectively.

The economy was projected to grow by 4.9 per cent next year and 5.0 per cent in 2019, said the World Bank in this month’s global economic prospects.

It said income support measures, higher infrastructure spending and improved exports were expected to drive growth.

Growth in large commodity exporters is firming, supported by higher commodity prices and gradual monetary policy easing as well as improved confidence in countries like Malaysia.

“In Malaysia, stabilising commodity prices have lifted business sentiment and investment.”

Export growth, especially in electrical and electronics goods, was being bolstered by a global pickup in manufacturing and trade and a modest recovery in oil and gas shipments.

On inflation, the World Bank said regional inflation had been trending up, with increased price pressures in Malaysia.

In contrast to the outflows experienced earlier, the World Bank said sovereign bond spreads had narrowed for commodity exporters like Malaysia, and capital inflows to the bond and equity mutual funds had resumed.

Malaysia has made some progress in renewing medium-term fiscal consolidation efforts.

On risks to the outlook, it cautioned about domestic “vulnerabilities” related to elevated local debt and that large external financing needs would raise the impact of external shocks.

The World Bank warned that changes to trade policies would affect open economies such as Malaysia, where there were sizeable exports to advanced economies.

Meanwhile, the slowing of export growth in April has not prompted research houses to revise the growth outlook for this year as they found the trade numbers to be strong.

The strong numbers have led Nomura Research to maintain its above-consensus gross domestic product growth forecast of 5.3 per cent for this year.

The research house noted manufactured export volume growth had been holding up in volume terms, even though export growth slowed to 8.6 per cent in April from 12.4 per cent in March.

AmBank Research expects the improving external demand and firm commodity prices as well as volume helped maintain the strong trade numbers as reflected by the manufacturing, mining and agriculture data in April.

“We expect the positive trend from exports to continue in the coming months, supported by a combination of steady export volume growth, firm commodity prices as well as low base.”

It projected the export volume to grow by 3.0 per cent this year and 3.4 per cent next year.

On downside risks to growth, key data, such as the Purchasing Managers’ Index, remained less exciting and pointed to potential weaknesses from manufacturing due to weak domestic and external demand.

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