ANZ lowers Malaysia’s growth forecast as consumption, investment dip

June 11, 2018

KUALA LUMPUR – ANZ Bank has revise lower its GDP growth forecast for 2018 to 5.4% from 5.7% previously, mainly due to the weaker out-turns in the early part of the year. “We are also revising our GDP growth forecast for 2019 to 5.2% from 5.5% previously, on the back of lower public consumption and investment, alongside an expected moderation in export growth,” ANZ says in a research note.

“Nonetheless, these are still robust growth rates amidst near-term policy uncertainty.”
ANZ says the removal of GST will push CPI inflation lower, and it has revised its CPI inflation forecast for 2018 to 0.7% from 2.7% previously. “Our 2019 forecast have also been reduced to 1.7% from 2.9%.”
The note says: “We expect the Pakatan Harapan Government to maintain the previous Administration’s fiscal consolidation path. Whether some or all of the Government guaranteed debt is brought officially onto the Government’s balance sheet and how credit rating agencies view this is a key uncertainty.
“Given low inflation and near-term uncertainty, we expect BNM to maintain the OPR at 3.25% for the rest of the year. We do not expect the appointment of a new Governor to materially change the Central Bank’s reaction function.
“We maintain our view that the ringgit is undervalued at current levels. Once there is clarity on the Government’s policies and fiscal situation, we can expect the ringgit to once again recouple to oil prices. We maintain our USD/MYR year-end forecast at 3.75. (ATI).