This article first appeared in The Edge Financial Daily on December 14, 2017

KUALA LUMPUR: Malaysia’s economy is expected to expand faster than previously anticipated this year, the Asian Development Bank (ADB) said, but the momentum will likely slow in 2018.

With third-quarter gross domestic product growth tracking at 6.2% — its fastest pace in more than three years — and bringing average growth in the first three quarters of the year to 5.9%, the regional development bank has lifted its forecast for 2017 to 5.8% from the earlier projection of 5.4% in September.

The revised forecast is also assuming that the prospect of continuing robust domestic demand and external demand will be more buoyant than earlier expected.

“With the higher base in 2017, growth is forecast to ease to 5.3% [from an earlier estimate of 5.4%] in 2018,” ADB said in its Asian Development Outlook 2017 Update report released yesterday, an update of the bank’s previous estimates released in September.

ADB is also projecting Malaysia’s inflation to grow to 4% this year from an earlier forecast of 3.7% in September. However, it retains earlier inflation forecast of 2.7% for 2018, expecting it to slow from 2017 as domestic price pressures subside.

“In Malaysia, inflation climbed to 4% in the first 10 months of 2017 from 2.2% in the same period last year, largely because of a one-off adjustment to fuel prices affecting transport in the first half of 2017 and, in the second half, the pass-through of rising international fuel prices,” it noted.

“Food price inflation in the first 10 months of 2017 was also notable at 4%,” it added.

Similar to a stronger outlook for Malaysia, the ADB also raised its economic growth estimate for developing Asia to 6% for this year from a previous estimate of 5.9% in September, citing stronger-than-expected trade expansion in Central, East, and Southeast Asia and China’s resilience.

However, the growth outlook for the region is still expected to slow slightly to 5.8% in 2018.

“Developing Asia’s growth momentum, supported by recovering exports, demonstrates that openness to trade remains an essential component of inclusive economic development,” ADB chief economist Yasuyuki Sawada said in a statement yesterday.

He added that countries can further take advantage of the global recovery by investing in human capital and physical infrastructure that will help sustain growth over the long term.

Meanwhile, the growth outlook for Southeast Asia was raised to 5.2% for both this year and 2018, higher than the September forecasts of 5% and 5.1%, respectively.