THE Malaysian Institute of Economic Research (MIER) has revised Malaysia’s gross domestic product (GDP) growth downwards to 5.1% for this year due to impact of high oil prices, lower than its previous forecast of 5.4% in April.
Despite the revision, executive director Prof Dr Mohamed Ariff said the forecast still fell within the Government’s growth range of 5% to 6%.
He said MIER expected the sluggish performance of the economy to continue from the second to the third quarter of the year, adding that its forecast GDP growth in the third quarter was about 5% and close to 6% for the last quarter of the year.
MIER is concerned with the global impact of higher oil prices, which affects growth rate projections for developed countries. This would soften the external demand for Malaysian products and hurt GDP growth, he said.
Ariff also said the Government might also reduce oil subsidies further, following the fiscal drive to reduce the budget deficit.
“Chances are high oil prices will prevail until some time and although the electronics sector is expected to rebound, it is not happening yet.
“We only expect an upturn in the economy in the fourth quarter of the year,” he told reporters on the sidelines of the MIER 20th National Economic Briefing in Kuala Lumpur yesterday.
MIER expects domestic demand to cushion part of the slack experienced as a result of softer external demand.
The private sector is also expected to be the main engine of growth with private consumption staying resilient, but with the impending slowdown, public spending is still needed to support overall growth.
For next year, MIER forecasts a further slowdown in the US economy as the dollar is expected to resume its downward adjustments, while higher interest rates will have a dampening effect on growth.
MIER also said easing demand for oil would allow prices to drop slightly and China’s soft-landing policies were likely to cause further moderation in the region.
MIER will not be revising its GDP forecast of 5.3% for next year until it receives more information on the global economy.
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