PETALING JAYA: HLIB Research has raised its growth forecast for the Malaysian economy to 5.8% for the second quarter (Q2) from 5.5%, after the release of various indicators that showed higher strength.
Subsequently, the full-year GDP forecast has also been lifted from 4.9% to 5.4%, on the back of strong Q2 manufacturing and services growth, but offset slightly by deterioration in mining and weaker agriculture sectors. The Q2 GDP results are expected to be announced this Friday.
Although HLIB Research expects growth impetus to remain resilient in 2H’17, it foresees a more moderate 2H as the base effect and exuberance wear off.
“In particular, agriculture growth is expected to ease further as the incremental recovery from El Nino wears off while mining activity will continue to be constrained by output cut commitment. Manufacturing growth acceleration is expected to taper on reduced global optimism. Meanwhile, a more subdued capital market activity will lead to slower growth in finance sub-sector,” it noted.
Meanwhile, HLIB Research opines that the central bank will keep the Overnight Policy Rate at current levels as growth stability has not been jeopardised by the spillover of robust exports to domestic demand; inflationary pressures ease; and recent improvement in loan growth is consistent with the pace of economic activity.
The research said in a separate report that the moderation in the Industrial Production Index (IPI) growth, which grew 4% in June, emanated from slower expansion in manufacturing and electricity sub-sectors, but was slightly offset by a mining output rebound after two consecutive months of contraction.
Nonetheless, it expects the near-term outlook for manufacturing IPI to remain favourable due to continued expansion in forward indicators such as global Purchasing Managers’ Index, world chip sales and business confidence.
Source: The Sun Daily