Malaysia’s GDP to Grow 3.8% Due To Slower Demand
Malaysia’s gross domestic product (GDP) is expected to grow 3.8% in 2017 from a projected 4.2% in 2016, says Standard Chartered. The global banking group cited slower domestic demand.
“We expect domestic demand, the main source of growth, to soften and moderate further in 2017. While domestic demand should partly offset weak external demand, it is likely to soften,” said Edward Lee, Standard Chartered head of Asean Economic Research, at the bank’s global research briefing in Kuala Lumpur on Wednesday
“The resilience in consumer demand this year has been due to one-off measures, and labour metrics appear to be weakening as unemployment grows and we expect all these will play out in the second half of the year.”
According to Lee, the second half looks to be particularly challenging for the country as Bank Negara Malaysia reacts to the possible interest rate hike from the US Federal Reserve sometime in May.
“We now expect Bank Negara to cut its policy rate by 25bps to 2.75% in May 2017. Inflation is not a concern for the central bank although we are factoring a rise in inflation to 2.5% in 2017 from 2% in 2016 on the dissipation of low oil prices and the goods and services tax (GST) effect,” said Lee.
“We think another rate cut would support household debt servicing without causing a surge in household leverage, and market volatility is a potential swing factor for Bank Negara next year.
“We expect the central bank to weigh the short-term cost of loose monetary policy against the need to provide long-term growth support via lower interest rates amid volatile market conditions.”
The bank expects the local market to continue to be driven by private investments, he said.