Friday 29 Mar 2024
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KUALA LUMPUR (Aug 20): CIMB Research said it downgraded its Malaysia 2018 gross domestic product (GDP) growth forecast to 4.7% from 5.2% to reflect adverse developments including lingering agriculture and mining supply disruption besides external headwinds' impact on the country's manufacturing sector.
 
In a note today, CIMB Research said the 4.7% GDP growth forecast is lower than Bank Negara Malaysia's (BNM) revised 2018 GDP growth estimate of 5% versus 5.5% to 6% previously. 

CIMB Research said : "Benefiting from a temporary tax holiday and labour market improvements, consumers are poised to take over the economic mantle as other growth engines lose velocity, particularly in the public sector. Apart from revenue forgone due from the Goods and Services Tax (GST), government spending will be further curtailed by recent revelations of unpaid GST claims to businesses amounting to RM19.4bn, which the Ministry of Finance has deferred until 2019. Moreover, supply disruptions in agriculture and mining are expected to linger for the rest of the year while the manufacturing outlook is clouded by external headwinds."

"To maintain macroeconomic stability, BNM’s preference likely tilts to keeping the overnight policy rate (OPR) unchanged for an extended period. Unless inflation remains weak, we think room for BNM to loosen monetary policy to stimulate demand isconstrained by the uptrend in US interest rates and lower market tolerance for deteriorating current accounts. Fiscal options to stimulate Malaysia’s economy are limited amid budgetary constraints, placing greater urgency on the government to provide policy clarity and accelerate meaningful reforms to unleash productivity growth," CIMB Research said.

On Friday, BNM said Malaysia's GDP grew 4.5% year-on-year (y-o-y) in the second quarter of 2018 (2Q18), driven by the private sector. BNM said in a statement that supply disruptions resulted in the slower y-o-y economic growth of 4.5% in 2Q18 compared to the 5.4% expansion in 1Q18.

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