Mier forecasts 4.5% GDP growth this year

Growth driver: A file picture showing an employee at work at the new Boon Siew Honda factory in Kepala Batas. Domestic demand is expected to continue to be the driver of GDP growth in 2017.

KUALA LUMPUR: The Malaysian Institute of Economic Research (Mier) has forecast a gross domestic product (GDP) growth of 4.5% for Malaysia this year against an estimated growth of 4.2% projected for 2016.

Executive director Dr Zakariah Abdul Rashid said the projection was based on the country’s healthy trade balance in September, October and November last year, which stood at RM6.6bil, RM9.8bil and RM9bil, respectively.

“If the trade balance momentum continues, there is some hope that Malaysia will perform better in 2017,” said Zakariah when unveiling Malaysia’s Economic Outlook Fourth Quarter 2016 Update.

He said the GDP growth forecast for 2017 was revised downwards to 4.5% from its previous forecast of between 4.5% and 5.5%.

Zakariah said that as Malaysia’s economic size was relatively small, the country would likely depend on the performance of the external environment including US president-elect Donald Trump’s policies, the Brexit process and China’s economic slowdown.

“The world is now surrounded by uncertainties such as these and we are unsure of how to move forward, especially when the protectionism sentiment in developed countries are gaining momentum,” Zakariah said.

Zakariah said for 2017, domestic demand would continue to be the driver of growth but at a slower pace of 4.6% (initial forecast: 5%).

Both private consumption and investment are expected to grow moderately by 5.5% and 6%, respectively, (initial forecast 5.6% and 6.6%, respectively).

Zakariah also revealed that the inflation rate in 2017 may be higher than the 2.1% recorded in 2016, due to high consumer spending.

He expected Bank Negara to maintain the overnight policy rate at 3% this year as efforts taken by the central bank last year was sufficient.

On the ringgit, Zakariah said it would remain between 4.4 and 4.5 against the US dollar this year, provided there is no significant factors that can further hurt the local note. – Bernama