Fitch Solutions lowers GDP growth forecast to 4.6% in 2018 from 5.1%

PETALING JAYA: Fitch Solutions Macro Research, unit of Fitch Group, has revised downwards its forecast for Malaysia’s growth to 4.6% in 2018 from 5.1% previously, after the weaker than expected third quarter result.

“We are revising our 2018 real GDP growth forecast to 4.6%, from 5.1% previously; and our 2019 forecast to 4.2%, from 4.5% previously. The 2018 revision reflects the weaker than expected Q318 result and our expectations for growth to slow further in Q418,” Fitch Solution said in a statement. 

“Malaysia’s growth in 2019 will likely be negatively impacted by broad-based headwinds from nearly all the expenditure components of GDP, except private consumption, which we expect to be supported by a large, one-time repayment of tax refunds in 2019,” it added. 

The country’s gross domestic product (GDP) growth for the three months to September 2018 came in at an annualised 4.4%, slightly down from 4.5% in the preceding quarter.

Fitch Solutions said the revision to the 2019 figure reflected its concerns about exports and investment growth for next year. 

“We expect Malaysia’s 2019 external outlook to be negatively affected by the combination of a slowing semiconductors cycle and a likely escalation of the US-China trade dispute amid still-low palm oil prices, which should weigh on the country’s trade balance. 

“Moreover, investment, particularly foreign investment, is likely to remain subdued due to continued policy uncertainty,” it said. 

Fitch Solutions has also revised its 2019 rate forecast from 3.50% to 3.25% and no longer expect Bank Negara to hike its benchmark Overnight Policy Rate (OPR) by 25bps, in light of the weakening growth picture. Even after this revision, significant downside risks to our OPR forecast remain.