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Moody’s forecasts 5.2pct GDP growth this year

Moody’s Investors Service expects Malaysia’s GDP growth to average 5.2 percent in 2018, underpinned by a pipeline of large infrastructure projects that will stimulate both public and private investment.

On top of that, it said the stable global and regional macroeconomic backdrop would support growth dynamics in Malaysia.

As an endorsement, Moody’s base case view that global and regional credit conditions will be broadly stable in the near term was shared by 63 pe cent of the participants at its recently held fourth annual Inside Asean - Spotlight on Malaysia conference.

Moody's conclusions are contained in its just-released report, "Cross-Sector - Malaysia: Heard from the market: Trade restrictions, tighter funding conditions are top risks."

The conference was held on March 21 in Kuala Lumpur.

The participants represented 23 Malaysian and international financial institutions, of which 55 percent were identified as investors, 19 per cent intermediaries, and 10 percent issuers.

According to Moody’s, Malaysia was likely able to manage a gradual rise in global interest rates.

More than 60 percent of respondents saw a low to manageable impact from rising global interest rates, which is in line with Moody’s views.

“We do not see Federal Reserve’s rate normalisation, which is expected to be very gradual and well communicated, as a risk for Malaysia,” it said.

“Our baseline expectation is for three to four Fed rate increases in 2018 and a further three increases in 2019,” it added.

However, the majority of poll participants or 52.4 percent are concerned about the level of household debt in Malaysia, and less so about corporate sector leverage.

Moody's considers that credit risk in the household sector is receding, driven by deleveraging, as household debt decreased to 84.3 percent of GDP at the end of 2017, from 88.3 percent in 2016.

The majority or 53 percent also expect stable credit conditions for domestic banks in 2018.

Moody's maintained its stable outlook on all the rated Malaysian banks, and expect that they will benefit from stable macroeconomic conditions.

Corporate credit quality risks were well balanced, but household leverage represented a meaningful tail risk despite recent structural improvements, it said.

- Bernama

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