KUALA LUMPUR (Oct 19): Malaysian Institute of Economic Research (MIER) projects that the domestic economy will grow by 5.4% in 2017, an upward revision by 0.7 percentage points (ppts) from July's forecast.

This is the second revision by MIER this year. In July, it raised the gross domestic products (GDP) forecast to 4.7% from 4.4%.

At a press conference on Malaysian economy's third quarter outlook today, MIER executive director Emeritus Professor Dr Zakariah Abdul Rashid said GDP growth was supported by stronger domestic demand due to the improvement in investment, consumption and better export.

"The external sector continued to progress as the world trade activities strengthen. Global economy is expected to grow stronger than expected, underpinned by faster growth in the advanced economies as well as the continued improvement in the emerging market and developing economies," Zakariah commented.

"The recovery in manufacturing and trade is gaining momentum, further strengthen by stronger investment activities and buoyant financial markets," he added.

Zakariah said MIER's annual GDP forecast reflect that Malaysia's fourth quarter GDP would experience lower growth.

"Our economy grew 5.7% in the first half of this year, and we are forecasting 5.4% for annual growth, (which) reflect that we are projecting slower growth in the second half," he explained.

Zakariah said the projection has taken into account MIER's business conditions index (BCI), which involves a survey of over 300 manufacturers in Peninsular Malaysia.

"The manufacturers told us that (they) experienced poor sale, slowdown in production and lower domestic and export order during third quarter this year, but they are expecting some recovery in the fourth quarter," he said.

MIER's BCI fell to 103.1 points in the third quarter this year, from 114.1 points in the second quarter this year.

Meanwhile, Zakariah said the growth in GDP may not translate to better welfare for the men on the street.

"GDP does not represent people's welfare or household income, GDP is the overall of the economy and people's welfare is part of an economy," he explained.

Citing data from the department of statistics Malaysia, Zakariah said the real increment for household income was 3.7% between 2014 and 2016.

"What we experience now is less than what we could have experience before back in 2014, because our median household income growth may not necessarily (be) higher than inflation. 2017 is a year of high prices, the high inflation phenomena has contributed to lower real income. First eight months of this year, the average 4% inflation in Malaysia is considered high," he said.