Hornbill Unleashed

November 12, 2016

Moderate economic growth likely in 2017

Filed under: Politics — Hornbill Unleashed @ 9:01 PM

Malaysia’s economy is expected to expand moderately in 2017 driven by domestic consumption, mega infrastructure projects and foreign direct investment. Julia Goh, Economist at The United Overseas Bank (Malaysia) Bhd (UOB Malaysia), explains the reasons behind the bank’s forecast and outlines the risks that will persist in the year ahead.

1. What is your growth forecast for Malaysia’s economy in 2017 and where will growth come from?

Malaysia’s Gross Domestic Product (GDP) is expected to expand moderately from 4.2 per cent in 2016 to 4.5 per cent in 2017 fuelled primarily by domestic consumer spending. In addition to domestic consumption growth, UOB Malaysia expects the economy to benefit from foreign direct investment (FDI) inflows resulting from the large pipeline of infrastructure projects over the next five years. Gross FDI inflows rose 3.2 per cent year-on-year to RM67.7 billion in first half of the year.

2. Why do you expect domestic consumption to be the key growth driver in 2017?

Both public and private sector consumption currently accounts for two-thirds of Malaysia’s GDP.  This trend is expected to continue into 2017 supported by new government initiatives, tourism and stable unemployment rates.

The government’s financial aid and tax relief measures for the lower and middle income groups will help hold up private consumption. The higher cash aid allocated to low income households, lifestyle tax relief, and giveaways for civil servants will help alleviate the effects of higher living costs and reinforce private consumption growth.

3. How confident are you that domestic consumption levels will remain stable in the year ahead?

Stable unemployment rates and high labour participation are lending to Malaysia’s domestic consumption growth.  Current labour force participation rate is high at 67.8 per cent and with companies still realising profits, the average nominal wage growth is expected to stay positive.

The advent of e-commerce and digital enablers has further lifted job opportunities along with the establishment of government initiatives under the Human Resources Development Fund to aid job placements and up-skill workers.

Our positive outlook for domestic consumption is further supported by Malaysia’s tourism growth.  The number of tourist who visited Malaysia in the first eight months of this year grew by 3.8 per cent to reach 17.6 million. This was largely due to the higher number of visitors from China and neighbouring countries Singapore, Thailand and Indonesia.

4. What, if anything, will derail Malaysia’s growth prospects in 2017? 

Mediocre global growth conditions and global geo-political events will continue to pose downside risks to Malaysia’s growth path.

The potential effects from the United States presidential transition, the United Kingdom’s referendum to exit the European Union, upcoming elections in the European Union, and the pace of US Federal Reserve (US Fed) interest rate normalisation policy, could weigh on Malaysia’s growth.

Closer to the region, the effects of China’s economic rebalancing, natural disasters and how Asia adjusts to lower growth prospects across advanced economies, could also impact the nation’s domestic growth negatively.

5. How can we manage and mitigate these global risk factors? 

Global risk factors will continue to impact the strength of the currency and the pace at which Malaysia returns to a stronger growth environment. Against these global challenges, Malaysia will need to carefully manage the balance between monetary and fiscal measures to support growth, ensure stable inflation, manage financial risks and maintain fiscal prudence.

6. What is your outlook for the ringgit?

We expect the ringgit to trade at 4.15 against the US dollar by the end of 2016. The currency is expected to trade higher to about 4.08 by mid-2017 supported by stable oil prices, a return of confidence following the US presidential elections and the US Fed’s gradual approach to raising interest rates. In the interim, it remains susceptible to bouts of volatility owing to the global uncertainties.


Source : The Heat Malaysia Online


2 Comments »

  1. GST: Yang dikejar tak dapat, yang dikendong keciciran.
    Kutipan GST dijangka mencecah RM40 bilion pada tahun 2017. Dengan kata lain, pendapatan boleh guna (disposable income) rakyat diperas menyebabkan penggunaan domestik terhimpit. RM40 bilion ini sepatutnya mengalir di pasaran sebagai pendorong kegiatan ekonomi, bukannya dijadikan cukai kerajaan. Selepas PRU-13, Najib mengumumkan pelaksanaan GST yang bermula pada 1 April 2015 ketika pembentangan bajet 2014. Ketika itu, saya telah menggambarkan GST sebagai satu hadiah pasca PRU yang diberi oleh Najib kepada rakyat, dan saya mengkritik bahawa GST bakal menyebabkan yang dikejar tak dapat, yang dikendong keciciran.
    Mengapa?
    1. Ekonomi Malaysia bergantung kepada pelaburan asing dan pengeluaran buruh murah ke dunia barat semenjak tahun 1970 hingga 2008. Selepas krisis kewangan global pada tahun 2008, ekonomi berorientasi eksport mengalami kemerosotan akibat kelembapan ekonomi dan kadar pengangguran amat tinggi di negara-negara barat. Oleh itu, ekonomi Malaysia terpaksa bergantung kepada penggunaan domestik.
    2. Penggunaan domestik boleh diwujudkan menerusi pelaburan kerajaan, penggunaan kerajaan, pelaburan swasta, dan penggunaan swasta. Pelaburan dan penggunaan kerajaan boleh dirangsang melalui pinjaman atau kutipan cukai. Pinjaman yang terlalu kerap akan menyebabkan kerajaan berhutang dengan faedah tinggi, manakala kutipan cukai pula kesannya akan membebankan rakyat. Bagi pelaburan dan penggunaan swasta, ia juga bergantung kepada pinjaman atau pendapatan individu.
    3. Namun Malaysia memerlukan sokongan ekonomi dari penggunaan domestik terutamanya penggunaan swasta. GST akan memberi kesan kepada rakyat yang berpendapatan rendah dimana pendapatan boleh guna mereka terhakis.
    4. Penggunaan domestik tidak akan aktif jika rakyat tiada pendapatan boleh guna yang mencukupi untuk meningkatkan kuasa beli. Seluruh ekonomi akan terjejas termasuklah eksport kita ekoran kedua-dua penggunaan domestik.
    5. GST menyebabkan:
    a) pendapatan boleh guna rakyat jelata terhakis,
    b) takungan penggunaan domestik,
    c) Kitaran yang memudaratkan seperti kelembapan pasaran, penurunan keuntungan perniagaan, pengurangan cukai kerajaan, perniagaan ditutup atau pemberhentian kerja.
    Secara kebetulan, Ringgit Malaysia yang menyusut selepas perlaksanaan GST tambah menjejaskan lagi penggunaan domestik. Akhirnya, disebabkan oleh cukai GST keadaan ekonomi bertambah suram. Yang dikendong tak dapat, yang dikejar keciciran. Kerajaan ibarat telah membunuh penggunaan domestik demi mengutip cukai yang kesannya juga tidak membawa rakyat dan negara kemana-mana. Bahkan ia semakin membebankan rakyat.
    Bajet 2017 tidak akan menyelesaikan masalah yang menghalang penggunaan domestik dan perkembangan ekonomi, malah tidak terlihat arah tujuan masa depan negara yang jelas. Bajet ini terus membawa Malaysia ke sudut yang lebih sukar dan buntu.

    Comment by almaz — November 13, 2016 @ 9:57 AM | Reply

  2. […] via Moderate economic growth likely in 2017 — Hornbill Unleashed […]

    Pingback by Moderate economic growth likely in 2017 — Hornbill Unleashed – gayaandco — November 12, 2016 @ 10:01 PM | Reply


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