KUALA LUMPUR (April 26): Malaysia's economy is expected to pick up slightly this year to register a gross domestic product (GDP) growth of 4.4% on the back of a weaker ringgit supporting exports, says the Institute of Chartered Accountants in England and Wales (ICAEW).

ICAEW economic adviser and Oxford Economics lead economist Priyanka Kishore said that while globally 2017 has started on a positive note, many uncertainties lie ahead.

"It still remains unclear to what extent the region and Malaysia will be impacted by the strengthening US economy and plans for more protectionist policies. Overall, prudent spending will be key to negotiating the way ahead," she said in a statement today.

According to ICAEW's Economic Insight: South East Asia report for the first quarter of 2017, an anticipated rise in US interest rates and appreciation of the US dollar are expected to lead to a tightening of monetary conditions and trigger capital outflows.

"Those conditions are likely to put stress on Malaysia given its high proportion of foreign bond holdings and current account deficit," it said.

The report said the uncertainty over the state of external demand, slowing local business investment and households being at risk of higher interest rates could also cause increasing financial stress.

Meanwhile, the ringgit is expected to hover around 4.4 to 4.5 against the US dollar for most of the year.

"Pressure for an interest rate rise will increase moving forward, with inflation surging on higher fuel and import costs in the second half of 2017. This may prompt Bank Negara Malaysia to hike the interest rate sometime in the second half of the year," the statement read.

The report noted that growth within Asia is also expected to be well below its long-term average of around 7% with the bulk expected to be generated by domestic demand, in line with a trend observed since 2011.

"In South East Asia, the contribution of domestic demand to growth in Asia is expected to rise to 4.2% with a stable overall GDP growth of 4.4%," it said.

Commissioned by ICAEW, the report provides its 147,000 members with a current snapshot of the region's economic performance that undertakes a quarterly review of South East Asian economies with a focus on Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.