IMF sees Malaysia growing at 4.5% in 2017

  • Nation
  • Thursday, 15 Dec 2016

KUALA LUMPUR: Malaysia’s economy is seen growing at 4.5% in 2017 on strong private consumption but will continue to suffer from weak commodity prices and slowing private investment, the International Monetary Fund (IMF) said on Thursday.

Malaysia has been buffetted by poor demand for its exports of commodities and liquefied natural gas over the past year. In January, the government cut spending and revised its 2016 growth forecast down to 4.0-4.5% from 4.0-5.0% in January.

“While the Malaysian economy has adjusted well to lower global oil prices, sustained low commodity prices add to the challenges of fiscal consolidation,” said IMF’s Daisaku Kihara, who led a two-week consultation mission to Malaysia in early December.

While Malaysia is a marginal oil exporter, it is the world’s third largest exporter of LNG, contract prices for which are linked to crude prices.

“Heightened global financial stress could potentially spill over to domestic markets,” Kihara said in a statement.

The IMF says Malaysia has performed well “despite significant headwinds” stemming from structurally weak growth in developed and emerging markets, and expects 2016 growth to come in at 4.2% aided by a diversified economy and a flexible exchange rate.

Medium term growth is seen at 4.5 to 5.0%.

Malaysia’s ringgit, however, has been Asia’s worst performing currency in recent weeks, at one point losing nearly 7% against the dollar following Donald Trump’s US presidential election win on Nov 8.

To stem the decline, Malaysia’s central bank stepped in and warned of “prompt supervisory intervention” against any individuals or banks engaged in ringgit trade in the offshore non-deliverable forwards (NDF) market.

Kihara says the current monetary policy “is appropriate in the baseline scenario of moderate growth, low inflation, and external uncertainties”, but stressed the need for careful calibration to support growth while maintaining financial stability.

He said Malaysia has made “significant progress” towards its goal of achieving high-income status, which need continued efforts towards structural reforms to boost longer-term economic growth.

But Malaysia will need to keep an eye on its “relatively high” household debt, and stay on track on its fiscal consolidation drive and goal of slashing its budget deficit to 3.0% in 2017, Kihara added. - Reuters

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 0
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

Next In Nation

Early downpour disrupts Palm Sunday procession at Penang church
Pakatan reps should be given significant portfolios in new Melaka exco line-up, says Idris
Many committees, still no solutions, says Mogok Doktor Malaysia
Fewer buses on the road
Chinese investors see potential in Malaysia, says Wee
No one barred from universities, says Higher Edu minister
Rushing to get everything stitched in time
Zahid: Melaka govt to reflect composition at federal level
Happy tourists, happy Penang!
Separation of roles can help avoid conflicts of interest

Others Also Read