Malaysia on strong growth path

KUALA LUMPUR: Compared to forecasts at the start of the year, Malaysia is one of the economies in Asean that surprised most to the upside, said Standard Chartered Bank head of Asean Economic Research Edward Lee.
“The pickup in external demand was not unexpected but domestic strength exceeded expectations,” he told SunBiz after the Malaysian economy recorded a stronger growth of 6.2% in the third quarter of 2017 (Q3), the best since Q2 of 2014, mainly driven by private sector spending.
“Q3 GDP (gross domestic product) print came in above consensus of 5.7% and our own forecast of 5.8%. The economy continues to be very strong, with private consumption and investments maintaining their strength. We had expected some slowdown in the consumer but this did not materialise,” added Lee.
Lee said his 2017 full year forecast was 5.4% but with the 2017 nine months GDP growth averaging at 5.9%, he noted that there is upside bias to its full-year call.
Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim last Friday said given the continued strong growth performance in Q3, the Malaysian economy is on course to register growth that is close to the upper range of the official projection of 5.2%-5.7% in 2017. Domestic demand is expected to support this expansion.
On the external front, exports will continue to benefit from the favourable global demand conditions. Headline inflation is expected to average at the upper end of the forecast range of 3%-4% for 2017 as a whole.
He also pointed out the possibility of 2017 GDP coming in beyond 5.7%, but noted that it is too early to tell.
“But the numbers look good because the export sector is still showing double-digit growth and that will be a pleasant surprise. But watch the external environment, which will have an influence,” said Muhammad.
Commenting on how some people are not feeling the growth, Muhammad said this is due to sustained cost of living pressures, especially the B40 groups and concerns over employment opportunity.
“We need to look at it in totality, we need to look at an economic policy that can create better paying jobs, we need to look at industries that can generate high value added, we need to relook our education policy to train our people to be more productive.”
MIDF Research forecast GDP to average at 5.8% in 2017. Based on the current development and indicators, it is optimistic that Malaysia’s economy will expand by 5.8% this year given the upbeat performance of domestic and global economy. Besides stable labour market, continued wage growth and moderating inflation will support and spur domestic economy.
“Moving forward, we foresee the economic performance in the fourth quarter of 2017 to expand at slower pace,” said MIDF.
Meanwhile, Muhammad said the exposure of financial institutions to the property sector is at prudent levels but is more concerned on the negative spillovers of the oversupply of properties to the other sectors.
He pointed out three segments in the property sector that is of concern, including high-rise condominiums, office space and shopping malls.
“What concerns us is that if you’re not careful, the oversupply in the real property sector might have an impact in other economy sectors as well, for instance, loss of jobs, loss of spillover effects from the construction industry,” said Muhammad.
He said the ringgit is reflective of Malaysia’s economic strength, with more liquidity in the market now.
“The ringgit levels are not influenced by speculative flows but reflective of real economic activities in the financial market.”