MALAYSIA is expected to see gross domestic product (GDP) growth of 4.7% in 2019, thanks to a strong start in the year’s first half, said the Socio-Economic Research Centre (SERC).

SERC executive director Lee Heng Guie projected economic growth of around 4.6% in the second half of the year.

He attributed this to downside risks in the form of the global recession, China-US trade war and slowdown in domestic demand.

The forecast is within the range of Bank Negara’s full year estimation of economic growth of between 4.3 to 4.8%.

Malaysia performed beyond expectations in the second quarter to register GDP growth of 4.9%.

Growth for 2020 is expected to moderate to 4.5%.

SERC expects headline inflation to average at 0.8% in 2019.

“We are still waiting for the government to announce the targeted fuel subsidy that was proposed in the 2019 Budget,” Lee added

If the fuel subsidy is rolled out, there is a high likelihood that pump prices will be floated based on market rates, which will in turn affect the Consumer Price Index.

Ringgit to dollar is projected to hover around the RM4.15 to RM4.20 mark , Lee said. 

FTSE Russell’s announcement on the Equity Country Classification on September 26, as well as Malaysia’s position on the US currency manipulation list would have an affect on the exchange rate for the ringgit, he said.

On the possibility of the central bank cutting interest rates again after a slashing in May, Lee said the the current rate of 3% is likely to be maintained for now.

Any cuts would likely take place in the first half of next year, he said.

Private consumption is expected to expand at 7.2% while private investment is projected to grow at 2.6%.

On the global front, the revision of global growth by the International Monetary Fund (IMF) to 3.1% is a cautionary sign that the global economy is at risk of recession. 

According to the IMF’s yardstick, recession happens when global growth hits 3%.

Malaysia is in a position of strength to face headwinds, thanks to its economic and financial fundamentals which is supported by facilitative policies and accommodative monetary policy.

Lee said a flexible exchange rate is the first line of defence against external shocks from the uncertainty in global economic conditions. This is backed by international reserves and sustained current account surplus.

Additionally, a well diversified trade, economic sector and source of foreign investments will help reduce vulnerability and risks inflicted by any particular sector, industry and country.

On the domestic front, the government should also continue to exude the political will to enhance economic resilience and implement coordinated policy reforms to ensure medium term sustainability.

“Delays or resistance to the reform agenda could undermine confidence to lower investment and growth,” he said.

He added that effective and well-designed structural reforms are key in boosting growth potential, raising productivity and investment and reducing costs of doing business. – September 24, 2019.