KUALA LUMPUR, Sept 18 — Malaysia is expected to record a gross domestic product (GDP) growth of 4.9 per cent for the remainder of 2018, backed by a multi-year high of 8 per cent year-on-year surge in household spending, said the Institute of Chartered Accountants in England and Wales (ICAEW).
In a statement today, it said household spending would remain the key driver of GDP growth through to 2019 amid moderate public spending.
“Consumer sentiment registered highs following the new government’s abolishment of the Goods and Services Tax (GST) and re-introduction of fuel subsidies.
“However, public spending is expected to moderate as the government reviews major infrastructure projects and undertakes plans to control expenditure and improve fiscal deficit,” the institute said.
Although the reinstated Sales and Services Tax (SST) would go some way towards improving the government’s bottom line, it might not be enough to bridge the revenue gap caused by the removal of GST, ICAEW said.
“In the short term, the government has fiscal room as oil tax revenues are likely to reach US$75 (RM310.60) per barrel on average in 2018, compared with previous expectations of US$52 per barrel.
“In the long term, further expenditure cuts and/or a new source of revenue generation will be needed in order for the government to realise its commitment to lowering fiscal deficit beyond 2018,” it explained.
Elevated US-China trade tensions were also expected to further challenge Malaysian exports, the institute said, adding that while the US was likely to remain focused on trade with China, higher US tariffs on Chinese imports would have an impact as Malaysia indirectly exported a large volume to the US via China.
ICAEW Economic Advisor & Oxford Economics Lead Asia Economist, Sian Fenner, said amid increasing global headwinds, including escalating US-China trade tensions and the added pressures of a stronger US dollar and rising US interest rates, macroeconomic policies in Malaysia were expected to remain supportive of domestic demand.
“This is against the backdrop of cooling Chinese import demand and increased trade protectionism,” she noted.
Meanwhile, according to ICAEW’s latest Economic Insight: South-East Asia (SEA) report, economic growth across the SEA region is also expected to cool in the second half of this year into 2019, easing to 5.1 per cent this year from 5.2 per cent in 2017 as moderating Chinese import demand and escalating US-China trade tensions dampen exports and business investment.
The quarterly report said economic growth edged lower in the second quarter across most of the SEA economies, with average GDP growth for the region easing to 5.2 per cent year-on-year and down from 5.4 per cent in Q1.
In addition, while recent regional trade data suggested some resilience in external demand, it said forward indicators pointed to softer export momentum in the coming months.
Among SEA economies, Vietnam is expected to continue to outperform the region with the economy forecast to grow by 6.7 per cent this year and 6.3 per cent in 2019, while Singapore is expected to see a more discernible slowdown, reflecting its heavy dependence on exports (about 174 per cent of GDP).
ICAEW Regional Director for South-east Asia, Mark Billington, said many of the region’s economies were small, open and heavily dependent on exports, with a high level of exports to China.
“In a challenging export environment and with rising protectionism sentiments, we expect overall growth momentum in the region to ease in the second half of 2018 into 2019,” he added. — Bernama
Source: The Malay Mail Online