World Bank lifts Malaysia's GDP growth forecast to 5.2% for 2017

KUALA LUMPUR: In line with consensus predictions, The World Bank Group has revised its full-year gross domestic product (GDP) growth forecast for Malaysia to 5.2%, on the back of “faster than expected growth” chartered by domestic and external economies.
This marks the second revision to its forecast. World Bank initially thought the economy would grow 4.5% this year. In June it revised its projection upward to 4.9%.
World Bank Group lead economist Richard Record said, Malaysia’s growth story is attributable to factors such as strong external and domestic demand, robust private investments, which is linked to the external side, and faster than expected growth in the Chinese and advanced economies.
He is not so bullish on the economy next year however, expecting it to slow to 5% (next year), and further decline to 4.8% in 2019 as the effects of supporting factors wane, particularly in terms of the Chinese economy’s growth which is expected to recede in the medium term. China’s growth is expected to maintain at 6.7% this year, before easing to 6.4% in 2018.
The restructuring which the Chinese economy is expected to undergo may impact the demand for Malaysia’s tradable global products, as a result.
“By 2019 we expect normalisation of growth,” Record said during the economic update on East Asia and Pacific.
Meanwhile, World Bank Group representative and country manager ( Malaysia) Faris Hadad-Zervos opined that while the government is moving in the right direction in terms of reducing fiscal deficit, broadening tax revenue base and rationalising fiscal expenditure, there is still room for improvement, especially towards its aspirations of becoming a high-income nation.
“Key pillar to that is to look at what kind of economy,” he added.
He said digital economy is a critical criteria to foray into, which should be used as a source of income to sustain growth.
For this, a growing and ready supply of highly skilled and highly equipped labour is required, as well as the involvement of small and medium enterprises (SMEs) in the exports sector is vital.
Hadad-Zervos said while the local SME scene is vibrant, it is still falling short in terms of exports as compared to high income nations.
Malaysian SMEs only contributes about 4.4% to overall exports.
On the regional front, the developing economies of East Asia and the Pacific is expected to expand at 6.4% in 2017, supported by stronger growth in advanced economies, moderate recovery of commodity prices and recovery of global trade.
Speaking via teleconference, World Bank chief economist (East Asia and Pacific) Sudhir Shetty said, Thailand and Malaysia were expected to grow more rapidly than expected, due to stronger exports, including tourism, for the former, and increased investment in the latter.
He said that risk factors that could potentially impact this positive outlook includes the uncertainties in advanced economies such as the US monetary policies and UK from the aftermath of Brexit, and high and rising fiscal deficits of regional countries coupled with high private sector debt level, and deteriorating asset quality.
Malaysia, Indonesia, Timor Leste, Philippines, Thailand, Cambodia, Lao PDR, Myanmar, Mongolia, Papua New Guinea, Soloman Islands, Fiji, and Vietnam are categorised as developing economies of East Asia and the Pacific.