Malaysian real GDP likely to grow slightly over 4 pct this year and 4.4 pct in 2017-18, says Scotiabank

The Malaysian economy continues to register decently strong growth in spite of low and recovering energy prices, which are negatively affecting Malaysia’s energy sector. The country’s real GDP expanded 4.3 percent year-on-year in the September quarter, a rise from the 4 percent gain recorded in the second quarter. Domestic demand mainly drives the economic activity.

Private consumption is supported by stable wage growth and employment conditions, along with the government’s fiscal measures. Investment continues to be underpinned by infrastructure spending and private sector outlays in the manufacturing and services industries.

“Real GDP will likely expand by slightly over 4 percent y/y this year and accelerate to 4.4 percent in 2017-18 on the back of a pick-up in energy prices”, said Scotiabank in a research report.

Malaysia’s monetary authorities assess that the current policy stance is accommodative enough to guarantee that the domestic economy continues to be on a stable growth path along with stable inflation. The benchmark interest rate is expected to be left on hold at 3 percent in the months ahead, according to Scotiabank. The central bank had lowered the interest rate in July 2016.

Meanwhile, inflation is expected to be contained through 2018, yet modest upward pressure on prices is likely in 2017 because of higher global energy prices and the Malaysian ringgit’s recent depreciation, added Scotiabank. In October, Malaysia’s headline inflation rate came in at 1.4 percent year-on-year in October.