This article first appeared in The Edge Financial Daily on November 22, 2017

KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) has raised its growth forecast for the Malaysian economy this year to 5.6% — from 5.4% previously — driven by domestic demand.

The revision was made in view of the recovery in manufacturing, while trade was gaining momentum, further strengthened by stronger investment activities and buoyant financial markets, its executive director Emeritus Professor Dr Zakariah Abdul Rashid told the National Economic Outlook Conference 2018-2019 here yesterday.

Come the fourth quarter, businesses may see brighter prospects, especially for the manufacturing sector, as local sales, prices, export orders and production are expected to improve, he said.

On the contrary, it expects consumer sentiments to remain wary of jobs and incomes due to a soft income outlook, fewer job openings as well as price pressures.

In the third quarter, the Business Conditions Index fell from 114.1 points to 103.1, mainly attributable to poor manufacturing sales, a slowdown in production, besides lower domestic and export orders.

Malaysia’s Consumer Sentiments Index also retreated 3.6 points quarter-on-quarter to 77.1 points.

In view of the improvements in domestic demand and cost-push pressure, resulting from higher oil prices and a continued depressed ringgit, MIER expects the inflation rate for 2017, as measured by the consumer price index, to average higher at 3.8%, compared with 2016’s 2.1%.