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Analysts confident domestic demand, private sector will drive growth

Despite recording a moderate GDP growth of 4.4 percent in the third quarter of this year, analysts and economists remain confident of Malaysia’s future prospects, suggesting that domestic demand and the private sector will be the key drivers of economic growth going forward.

On Nov 16, Bank Negara announced that the country’s GDP was driven by household spending, higher private investment and lingering effects of one-off supply shocks.

The central bank said for the first nine months of the year, the economy expanded by 4.7 percent and was on track to register a growth of 4.8 percent in 2018.

Malaysian Institute of Economic Research (MIER) executive director Zakariah Abdul Rashid said the 3Q GDP growth was within expectation since July and Aug trade figures were unconvincing.

“The growth has to be driven by the Consumer Price Index and as what we have seen from the data just released,” he told Bernama.

Zakariah also said the Malaysian economy was in the midst of adjusting itself to the current economic situation and MIER has forecast 4.7 percent GDP growth for 2018.

“In the medium and longer terms, the electric and electrical sector may rebound and contribute to the country’s growth.

“The fundamentals are intact but weaker external demand is limiting overall growth performance. Domestic demand is still going to drive the growth in the next quarter,” he added.

Meanwhile, Institute for Democracy and Economic Affairs (Ideas) research director Laurence Todd told Bernama that future growth will come from the private sector-led innovation and entrepreneurship.

“This can be unlocked if the government follows through on promises to reduce the government’s role in the economy and reform procurement to make it more competitive and transparent,” he said.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid also opined that the private sector could further drive economic growth.

He said private sector spending was the main pillar for growth, in particular, private consumption which grew by 9.0 percent in 3Q 2018, which was way beyond the trend level of 6.9 percent.

“The zero per cent goods and services tax, strong employment and wage growth, as well as, positive consumer sentiment, are the main reasons for higher consumer spending in this quarter.

“Similarly, private investment also reported commendable growth of 6.9 percent as manufacturers, especially those in the export-oriented industries, actively upgraded their production capacity,” he told Bernama.

Afzanizam also said the upgrades would allow better economies of scale to cater for higher demand and competitive exchange rates have been supportive of export-oriented industries.

However, he said external developments such as the series of rate hikes in the United States, the effect from the trade war between the United States and China, the United Kingdom Brexit on global growth would likely influence overall business and market sentiment.

- Bernama

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