Strong domestic demand, especially private sector expenditure, is expected to drive Malaysia's economic growth next year.

The private sector activity would be supported by pro-growth fiscal and accommodative monetary policies in an environment of stable inflation, which is projected to range between two and three percent.

As for the public sector expenditure, it would be driven mainly by higher capital investment by public corporations, said the Economic Report 2016/17 released by the Finance Ministry in conjunction with the Budget 2017 announced by Prime Minister Najib Abdul Razak today.

Aggregate domestic demand is expected to expand 4.9 per cent in 2017, underpinned largely by private sector expenditure, which is envisaged to grow 6.2 percent.

On the other hand, public sector expenditure is expected to increase marginally by 0.6 percent.

In tandem with favourable business sentiment, private investment is forecast to increase 5.8 percent, accounting for 17.2 percent of Gross Domestic Product.

On the supply side, growth is expected to be broad-based with all sectors recording positive growth.

Value-added in the services sector is expected to increase 5.7 percent in 2017, driven by expansion across all sub-sectors.

The manufacturing sector is anticipated to grow 4.1 percent in 2017, with growth in export-oriented industries, supported by sustained demand for electrical and electronics goods.

Growth in the agriculture sector is envisaged to turnaround to 1.5 percent in 2017 on account of improvement in the output of oil palm, rubber, as well as strong growth in the food commodity sub-sector.

The mining sector is expected to expand 1.4 per cent next year, attributed to higher output of natural gas, while the construction sector is projected to grow 8.3 percent, mainly supported by the commencement of large infrastructure projects.

As for Malaysia’s external position, it is expected to improve in 2017, mainly supported by strengthening global growth and trade.

Gross exports are expected to grow at a faster pace of 2.7 percent, while gross imports are anticipated to expand further by 3.4 percent.

The services account is projected to remain in deficit at RM23.1 billion in 2017 in line with better prospects for trade and investment-related activity.

The primary home account is envisaged to register a larger net outflow of RM37.4 billion due to higher profits, dividends and interests accruing to multinational operations in Malaysia.

As for the secondary income account, it is expected to remain in deficit at RM24.8 billion, mainly attributed to outward remittance by foreign workers.

Nevertheless, the surplus in the goods and services account will be more than sufficient to offset the net outflows in income accounts.

Hence, in 2017, the current account is expected to remain in surplus at RM14.8 billion.

- Bernama