KUALA LUMPUR: Malaysia’s economy is expected to expand 4.9 per cent this year due to the upbeat performance of domestic and external trade sectors, said MIDF Research in a report yesterday.
In a report titled Malaysia Equity Research second quarter 2019 outlook, it also said, gradual pick up in global commodity prices would lend another boosting factor to the economic growth this year.
“Supportive economic policies, stable labour market, continued wage growth and tame inflation will support and spur the domestic economy,” said the research house.
The country’s economy grew by 4.8 per cent last year.
It said clarity in domestic policy direction observed through mid-term review of the 11th Malaysia Plan and Budget 2019 would lend support to both domestic and external sector.
“The new economic direction which focuses on free market and investor-friendly will have significant impacts on overall business confidence and investment flows,” it said adding that, the growth of the Malaysian economy in 2019 would be influenced by various internal and external factors.
On the business expectation for the next six month, it is expected to enjoy steady pick up especially for agriculture, manufacturing and services sector.
MIDF Research also forecasted that Bank Negara Malaysia would maintain the overnight policy rate (OPR) at 3.25 per cent this year on anticipation of less pressure from both domestic and external fronts.
“Since there will be less pressure from both domestic and external fronts, we anticipate that Bank Negara will maintain the OPR at 3.25 per cent in 2019 barring any surprises in domestic economic growth,” it said.
The research house also said the headline inflation rate is expected to average at 2.2 per cent this year compared to one per cent in 2018.
It anticipated inflationary pressure mainly from fuel-related items to increase, consistent with the expectation that crude oil price to average at US$75 per barrel for 2019.
“However, inflationary pressure remains benign as the core inflation rate is expected to remain steady in 2019, hovering around 2018’s level of one per cent.
“As core inflation rate remains low, we opine change in monetary stance is not required at this juncture as it would affect the trajectory of domestic growth,” it said.
Furthermore, MIDF said the US has indicated that their interest rate is nearing the neutral rate, suggesting that the central bank is preparing to slow down its normalisation exercise.
Looking ahead, it said Malaysia’s consumer inflation is likely to improve in upcoming month as average Brent oil price for the first three weeks of February this year, hovered at US$64 per barrel resulting in marginally higher domestic fuel price of RM1.96 per litre.
On the ringgit, it expected the local currency to strengthen to 4.00 against the US dollar by year-end, supported by a continuous current account surplus.
On the external front, MIDF Research viewed that the US and China would reach a trade deal soon.
It also said the effects of a trade war are gradually contained by most economies including Malaysia. – Bernama
