(File pix) A pick-up in broader public infrastructure projects will likely drive growth, says analyst Michael Wan.

KUALA LUMPUR: Credit Suisse expects the Malaysian economy to grow by 4.5 per cent next year, with growth supported by monetary policy rather than fiscal policy.

A less contractionary central government fiscal stance, a pick-up in broader public infrastructure projects, together with lagged impact of oil and commodity price stabilisation will likely drive growth.

“The Budget 2017 looks less supportive for growth than we initially anticipated and as such raises some downside risk to our GDP forecast,” said analyst Michael Wan.

Describing it as surprisingly tight, he said the probability of a rate cut in 2017 has likely risen given the still manageable inflation.

Headline expenditure to GDP ratio is expected to fall by 0.7 percentage points of GDP, down to 19.6 per cent of GDP in 2017 from 20.3 per cent of GDP in 2016 due to budgeted cuts in both operating and development expenditure.

“It is unclear if broader public sector wide fiscal position is expansionary, including non-financial public corporations, development expenditure is budgeted to fall by 1 per cent year-on-year in 2017, from a sizeable 17 per cent increase in 2016.”

Wan said there have been some improvements in construction contracts awarded thus far but public infrastructure disbursement has still been subdued.