KUALA LUMPUR: ? RAM Ratings expects Malaysia's overall growth in 2018 to remain resilient at 4.9 per cent, moderately lower than the initially forecasted 5.2 per cent, on the back of robust private consumption and slowing import activity.
In a statement today, it said the revelation of the government's key fiscal policy initiatives and direction going forward, and the renewed longer-term development policies of the revamped 11th Malaysia Plan after its mid-term review, would help provide more guidance on the medium-term economic growth trajectory.
Head of Research Kristina Fong said the new government's first 100 days in office was just the start of what seems to be a period of re-adjustment for the economy and managing this required a careful balancing act by both policy makers and businesses alike.
The rating agency said private consumption would continue to be the driving force for domestic demand this year with growth forecasted at 7.4 per cent as private investment is set to slow.
“Infrastructure project rationalisation has come at a time of moderating capacity building activities, as shown by insights from our quarterly RAM Business Confidence Index, which indicates reduced impetus for marginal investment activity as capacity constraints become less binding.
“As such, private investment growth is expected to be less robust than anticipated, coming in at a more muted 3.9 per cent compared to our initial forecast of 8.3 per cent,” it said.
According to RAM Ratings, headline inflation is anticipated to stay subdued at 1.3 per cent on the back of a sizeable downward pull from Goods and Services- zerorisation, the reinstatement of fuel subsidies and a lower-than-expected contribution from food inflation this year.
It said there seems to be some downward bias for the overnight policy rate (OPR) this year, in view of the lower core inflation trajectory and moderating growth.
“However, our base case is still for the OPR to stay put at 3.25 per cent for the rest of the year, as we feel lingering policy uncertainties and macro risks may continue to pose some capital outflow bias.
“That said, monetary policy will, in our view, play a bigger role as fiscal consolidation is seen to be a key trend going forward and, hence, will afford less scope for additional pump-priming,” it added. - Bernama
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