KUALA LUMPUR: RHB Research Institute says in its latest economic update that it expects private investment to grow at an increased pace of 7.7% year-on-year (Y-o-Y) in 2017, from 4.3% last year, underpinned by ongoing construction of infrastructure projects and a pickup in exports.
This comes following an increase in the Malaysian Institute of Economic Research's (MIER's) business conditions index (BCI) by 1.4 points to 114.1 in 2Q17, its highest level in four years. This was mainly attributed to improving domestic orders and manufacturing sales supported by the strong growth in exports during the quarter.
However, RHB Research notes that the private investment growth could be partly offset by the rising cost of doing business and subdued capex in the oil and gas and housing sectors.
RHB Research also says it expects improving consumer sentiment as MIER's consumer sentiment index (CSI) rose by 4.1 points to 80.7 in 2Q17, after dropping 3.8 points to 76.6 in 1Q17, amid an improved outlook on financial and employment expectations.
"Although this is still below the 100-point threshold, we expect consumer sentiment to continue improving ahead as gains from the external sector spill over to domestic economic activity. As a whole, the growth in private consumption is expected to hold up at 6.2% for 2017, from +6% in 2016," says RHB Research.
MIER also raised its real GDP growth forecast to 4.8% in 2017, from 4.5% previously and compared to 4.2% in 2016 on the back of the recovery in external activities on improved commodity prices. This is in line with RHB's 2017 GDP forecast of 4.8%, albeit with an upside risk.
"For 2018, we expect the Malaysian economic growth to trend higher to 5% in tandem with a stronger global growth outlook," says RHB Research.
According to MIER, domestic demand is expected to continue to be the engine of growth for the Malaysian economy for this year, with a stronger growth of 4.6% in 2017, from +4.3% in 2016. This is due to an improvement in gross fixed capital formation as government and private investment gains pace.
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