KUALA LUMPUR: The local economy is expected to grow at a slower pace of 4.5% to 5.5% this year, mainly driven by domestic demand, said Bank Negara Malaysia (BNM). The economy grew by 6% last year.

BNM said its gross domestic product (GDP) projection also took into account weaker export growth in 2015. 

Domestic demand is seen growing at 6% this year, driven by private sector spending which is anticipated to stay resilient amid improvement in public expenditure growth.

“Private consumption is forecast to record a more moderate growth during the year, after registering five consecutive years of above-average growth rates since the financial crisis in the advanced economies. 

“While household spending is expected to be affected by the implementation of the goods and services tax in April and lower earnings in the commodity-related sectors, its impact will, however, be partially offset by government measures to assist targeted groups, the additional disposable incomes from lower fuel prices and the favourable labour market conditions,” said BNM.

On the supply side, it said all crucial domestic sectors are expected to register growth.

In 2015, BNM said export growth is seen weaker at 3% against the 5.1% expansion last year. The slower export growth projection takes into account lower commodity prices and weaker expansion outlook for major economies. 

“...the growth momentum in several major economies is also weaker than earlier expectations. Different growth momentums could lead to divergent monetary policy stances in the major economies, precipitating volatility in capital flows.”

This article first appeared in The Edge Financial Daily, on March 12, 2015.