SERC executive director Lee Heng Guie said the revision takes into account the moderating global growth and weakening exports amid cautious domestic sentiments.
“I’m looking at about 4.4% for first quarter based on the two months numbers from exports. I think exports will be a drag. The one that will still be supporting the economy is consumer spending but I think the growth will not be as strong as the fourth quarter 2018 consumer spending. That’s why overall I’m looking at about preliminary 4.4% for first quarter,” he told reporters at a briefing on SERC’s quarterly economy tracker today.
Last month, Bank Negara Malaysia lowered the GDP projection to 4.3% to 4.8% on the back of external headwinds.
Lee expects exports growth to fall to 3.3% this year from 6.8% last year due to slowing global demand, weak global semiconductor sales and moderate commodity prices.
Private consumption is expected to grow 6.8% this year, higher than Bank Negara Malaysia’s (BNM) 6.6% projection while private investment is expected to grow 4.3%, which Lee said is not very robust growth.
He said public sector spending remains a drag despite the revival of the East Coast Rail Link and Bandar Malaysia projects, with public consumption projected to grow 1.8% and public investment to shrink 4.8% this year.
He said the outlook for the first half of the year is still quite cautious as suggested by indicators such industrial production and export growth as well as the softening growth of business and households loan outstanding, but is hopeful of a better second half of the year, driven by consumption and some increases on the investment side.
SERC expects headline inflation to average between 1% and 1.5% this year due to some cost pass-through from domestic cost factors such as the lapse in consumption tax policy, higher minimum wage and electricity surcharges for businesses and potential increases in food prices.
On the Overnight Policy Rate (OPR), Lee said there is a chance of BNM cutting the rate at the Monetary Policy Committee meeting on May 7. SERC expects the OPR to reach 3% by year-end from 3.25% currently.
“With inflation risk being put on the back burner, BNM is expected to focus on sustaining domestic demand to counter the impact of moderating global growth on exports. The monetary policy decision will be data dependent,” he said.
Lee’s year-end forecast for the ringgit to the US dollar is between RM4 and RM4.15, supported by strong fundamentals, including current account surplus, reserves above US$100 billion (RM412 billion) and acceptable GDP growth of 4.3% to 4.8% as projected by BNM.
As the first anniversary of Pakatan Harapan in government draws near, Lee noted that the government has done quite a lot but the messaging is not there.
“I did a quick audit on some of the things they have done, I am quite happy with that. I think it’s a lack of communication. I hope that they continue to give us consistent narrative about what they are going to do and be consistent in what they are planning for the country. That will help to restore confidence about what they can deliver going forward.”
