Story on Kuala Lumpur city centre. Picture showing landscape of KL City Centre. FAIHAN GHANI/The Star.
KUALA LUMPUR: Malaysia’s gross domestic product (GDP) growth is projected to improve to 4.4% this year and 4.6% in 2018, lifted by firmer growth in the major industrial economies and a mild recovery in domestic investment, according to the Asian Development Bank (ADB).
In its 2017 Asia Development Outlook report, the bank said while GDP growth was forecast to pick up this year and next, it would remain well below the 5.3% average rate the country achieved in 2011–2015.
It noted that the private fixed investment’s outlook was “improving somewhat” with higher prices for hydrocarbons, recovery in agriculture, and better prospects for semiconductors.
“However, concern over possible global trade disruption and the impact of the normalisation of US monetary policy on capital flows to developing countries is likely to restrain recovery in investment,” ADB said.
The Manila-based lender expects large infrastructure projects in the pipeline - such as the Pan Borneo Highway, the Pengerang refinery and petrochemical plant, mass rapid transport projects in the Klang Valley, and the East Coast Rail Line and High Speed Rail line to Singapore - to spur both public and private investment.
As for net external demand, ADB said its drag on GDP growth was forecast to subside this year unless global trade was seriously disrupted.
Private consumption, meanwhile, is expected to grow this year at around last year’s pace.
“Rising wages are seen to underpin household spending, as are government measures to bolster incomes, including tax breaks, higher cash transfers to lower-income groups, and a reduction in mandatory employee contributions to the national retirement fund,” ADB said.
“Recovery in agriculture and rural subsidies will support rural incomes. However, dampeners on consumption spending include high household debt, which equals nearly 90% of GDP, and lacklustre consumer confidence.”
The bank said higher fuel prices, cuts to subsidies, and a weaker ringgit were expected to push prices up.
ADB forecast inflation to rise to 3.3% in 2017 and then fall to 2.7% with the fading of the base effect from lower prices last year.
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