Growth to remain within 5% band

Economy Report 2017.

THE Malaysian economic growth is expected to remain within the 5% band next year. According to the Economic Report for 2016/2017, growth is expected at between 4% and 5% in 2017 underpinned by strong domestic demand especially private sector spending.

The projections are marginally higher than the 4%-4.5% in 2016 and remains about the same of 5% economic growth in 2015.

Gross national income per capita is forecast to rise 5% to RM39,699 from RM37,812. Pro-growth fiscal and accommodative monetary policies will drive private sector activity while public sector expenditure will be driven by higher capital spending by public corporations.

All sectors of the economy are expected to show growth with the services sector by 5.7% next year along with all subsectors of the services segment, such as retail trade and information and communication.

The manufacturing sector is projected to grow by 4.1%, helped by sustained demand from the electrical and electronic sector despite lower production of petroleum-related products. Growth in the consumer and construction related industries will be supported by domestic demand.

The agriculture sector is expected to turn around with a growth of 1.5% in 2017 from a decline of 3.3% in 2016. Oil palm output is forecast to grow by 5.6% to 19 million tonnes while rubber production will jump by 4.6% from a decline of 10% in 2016.

The mining sector is expected to grow by 1.4% in 2017 on higher output of natural gas. The price of crude oil is expected to average US$45 a barrel in 2017 compared with US$40 a barrel this year.

The construction sector is expected to grow by 8.3% in 2017 from 8.7% in 2016, mainly supported by large infrastructure projects such as the MRT and the Pan Borneo Highway.

Affordable housing will drive the residential housing market while the non-residential sector is expected to benefit from mixed commercial development mainly in the Klang Valley, Johor and Penang.

Domestic demand is expected to grow by 4.9% in 2017 with the help of private sector spending which is expected to grow by 6.2%. Public sector spending is projected to grow by 0.6% in 2017 compared with a growth of 0.8% in 2016.

Private investment is expected to rise by 5.8% and will account for 17.2% of gross domestic product (GDP). Mega projects and the electrical and electronic segments will drive private investment growth. Private consumption is expected to rise by 6.3% on account of a stable labour market, accommodative interest rates and manageable inflation.

Private consumption share’s of GDP is expected to rise to 54.2% from 53.3% in 2016.

Public investment will account for 8.4% of GDP and increase by 1.1% in 2017 mainly due to capital expenditure by public corporations. Public consumption will likely rise by 0.4% as the Government reprioritise spending and reduce non-critical items.

On the external front, gross exports are expected to grow at a faster pace of 2.7% in 2017 following a rebound in the exports of commodities and continued demand for electrical and electronic goods.

Gross imports are expected to grow by 3.4% in 2017 from 1.3% following an acceleration in the import of capital goods and intermediate goods from higher manufacturing activity.

The services sector is projected to be in a deficit of RM23.1bil in 2017 from a deficit of RM22.1bil and the travel account should show a surplus of RM30.8bil in 2017.

The primary income account is expected to show a larger outflow of RM37.4bil while the secondary income account is expected to remain in deficit of RM24.8bil mainly due to remittances by foreign workers.

In 2017, the current account is expected to remain in surplus of RM14.8bil.

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