The Malaysian Institute of Economic Research (MIER) has revised downwards the country’s 2018 gross domestic product (GDP) growth forecast to 4.7 percent from an earlier 5.5 percent.

Executive director Zakariah Abdul Rashid said the lower target was due to a moderation in global demand and over-reliance on private consumption, amid weakened investment activities to steer growth.

"Domestic demand continues to drive growth and is expected to grow at 5.5 percent (this year), slower than last year's 6.5 percent," he told a press conference on MIER's Malaysian Economic Outlook in Kuala Lumpur today.

This, he said, is underpinned by robust though moderating growth in private consumption, compensating for the moderation in public consumption.

"The modest growth in public consumption is partly due to the government’s policy on cautious spending in the effort to address the issue of high public debt and simultaneously with the reduced revenue without the goods and services tax (GST)," he added.

Meanwhile, on the new tax regime to be announced by the government in the future, he said it was very unlikely that it would negatively impact economic growth in terms of public consumption.

“In my view, the government will try as best as it can to ensure the tax does not negatively impact the cost of living.

“I think the tax will not negatively affect low-income people, who as a group were burdened by the GST,” he said.

On the upcoming 2019 budget announcement, Zakariah said the government is expected to focus more on how to increase productivity, especially in the private sector, which is expected to remain as the key driver of economic growth.

"Budget 2019 is a ‘savings budget’, but this does not mean the government cannot spend, only that it has to ensure that any allocation will bring good results to the economy.

“Any expenditure is justified only when it is really necessary and brings positive returns to national growth as well as raises productivity,” he added.

- Bernama