RAM: Malaysia's economy to expand 5.2% in 2018

Business optimism in Malaysia leapt 24 percentage points (pp) to 52 per cent in the second quarter (Q2) of this year.

KUALA LUMPUR: Malaysia's gross domestic product is expected to expand by 5.2 per cent in 2018, on the back of strengthening domestic demand and resilient external markets.

RAM Rating Services Bhd Economist, Kristina Fong, said in general, hiring activities and labour force was becoming healthier this year, which would help boost domestic demand.

Investment activities also looked promising, she said, adding that from the interviews conducted by the rating agency with firms as well as its survey, the companies were increasing their investments.  "The unknown going into 2018 is how the external environment holds up. From our indicators, there is resilience in external demand," she told reporters after announcing the RAM Business Confidence Index here today.

Fong said that the ringgit was expected to average between 4.10 and 4.20 against the US dollar throughout the year and noted that the current bullish run is not sustainable. 

"There is a lot of feel good factors towards the end of last year and in January, including the expectations of a hike in the overnight policy rate (OPR) in January.

"This current upside of the ringgit is driven in part by the bullishness of oil prices and depreciation in the US dollar because of their expectations of tightening (in their monetary policy)," she added.  The OPR is expected to increase by 25 basis points from May this year.

"We feel that there should be more macro data that need to come out before a decision is made. Inflation is tapering off at the moment. (The OPR hike) is too early to do it in the first couple of meetings," said Fong.  

Meanwhile, the RAM BCI results indicated slight downside prospects in business performance among the small and medium enterprises (SMEs), pointing to the need for continued engagement with the firms in order for them to gain better access to funding and raise their participation in international trade.  

RAM BCI involved 3,500 corporates as well as SMEs, including those in the manufacturing, retail and construction sectors.- Bernama