KUALA LUMPUR: Bank Negara Malaysia’s more optimistic economic growth forecast of 5.5-6.0 per cent this year than the official target of 5.0-5.5 per cent announced by the Ministry of Finance last October is “broadly” reasonable, said analysts.
Affin Hwang Capital said this was based on a set of reasonable assumptions such as prices for Brent crude oil of US$63 per barrel and crude palm oil of RM2,700 per tonne.
This is also backed by global gross domestic product (GDP) growth forecast of 3.9 per cent for this year, with stable inflation of between two per cent and three per cent as well as a steady ringgit of around 3.90 to a US dollar, the firm added.
Kenanga Research said Bank Negara’s growth forecast appeared to take the view that Malaysia was relatively immune to the growing external uncertainty.
“Looming trade war, the increasingly volatile financial markets, the normalisation of interest rates by major central banks, signs of weak commodity market, are some of the issues that we believe would continue to feed towards the rising uncertainty in the world economy and would weigh on growth,” the firm said in a report today.
Kenanga Research said its 2018 forecast of 5.5 per cent growth was at the lower end of Bank Negara’s growth range. This reflected its view that growth already passed its peak in the second half of 2017.
“The reason it is still riding high is because there is still no let-up in the growth momentum. This is primarily due to the extension of the tech upcycle and the higher fiscal spending run up to the upcoming 14th General Election (GE14),” it added.
Bank Negara, the firm said, was more bullish on consumption and export activities, projecting private consumption to grow 7.2 per cent compared to its estimated 6.1 per cent growth.
“However, our forecast assumes higher public expenditure activities of 1.6 per cent compared to Bank Negara’s 0.6 per cent, in light of stronger fiscal push ahead of the upcoming GE14,” it added.
Kenanga Research is cautious on trade flows moving forward.
“We are concerned about the impact of (US President Donald) Trump administration's tariffs on trade and the possibility of similar retaliation by other major,” it said.