MIER: Malaysia to post moderate GDP growth of 4.5 pct this year

MIER: Malaysia to post moderate GDP growth of 4.5 pct this year

KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) has forecast Malaysia’s 2019 gross domestic product (GDP) to post a moderate growth of 4.5 percent compared with 4.7 percent last year.

Executive director Emeritus Professor Dr Zakariah Abdul Rashid said this is due to the slowdown in the global, as well as domestic demand.

He said the International Monetary Fund (IMF) projected the world’s economy to grow at 3.3 per cent in 2019, in contrast to 3.6 per cent last year.

“There are growing risks to the global growth tilted towards the downside, predominantly due to factors related to trade policy uncertainties and the weakening financial market sentiments,” he told reporters after MIER’s 24th Corporate Economic Briefing here today.

Zakariah said mounting trade tensions together with other emerging concerns, such as slower-than-expected growth in emerging economies, were causing instability in the financial market.

He said weaker economic growth in China due to the trade tensions with the US had contiguous effects on many world economies, including Malaysia.

Zakariah said the country’s net export was expected to further contract to 3.4 per cent from a contraction of 1.4 per cent in 2018, and with the backdrop of slower global growth, the Malaysian economy would have to heavily rely on domestic demand to steer growth.

However, he said domestic demand was expected to grow at a slower pace resulting from lackadaisical growth in both consumption and investment demand.

“The slowdown in private investment is due to a moderation in global investment flow and reduced demand for manufacturing goods,” he said.

Zakariah said the government was expected to enhance fiscal stimulus to boost growth, as easy money will intensify capital reversal due to monetary policy normalisation among developed economies and mitigate capital outflows.

He said capital outflows would exert a downward pressure on the value of the ringgit which in turn, would negatively influence domestic production and consumption.

“International reserves of Bank Negara decreased last year as the ringgit was under downward pressure.

“Nevertheless, reserves have been rising for this year, after declining four quarters in a row, indicating that the ringgit is strengthening,” he said.

Commenting on the outlook for commodities, Zakariah said the global outlook is mixed for the year.

He said demand for agriculture commodities, particularly crude palm oil (CPO), is expected to improve due to an increase in volume coupled with better prices.

“The price of CPO is expected to touch RM2,700 a tonne this year, compared with last year’s average price of RM2,232 a tonne,” he said, adding that this was mainly due to the increase in demand for biodiesel and a weaker ringgit.

Meanwhile, Zakariah said demand for petroleum products is bleak amid slower global growth.

The rising crude oil prices after bottoming out at the end of last year was mostly due to supply disruptions despite weak demand, he said.

“The short run price is expected to touch mid-US$70 per barrel in the first half of this year before falling back into the upper US$60 per barrel in the second half of 2019,” he added.


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