RAM projects GDP to grow 4.9pc in 2018, 4.5pc in 2019

City workers queue to buy breakfast sold from a car boot in Kuala Lumpur. Malaysia's economy is seen to grow 4.9pc in 2018, and 4.5pc the next year. — Reuters pic
City workers queue to buy breakfast sold from a car boot in . ’s economy is seen to grow 4.9pc in 2018, and 4.5pc the next year. — Reuters pic

KUALA LUMPUR, Oct 26 — RAM Ratings has projected gross domestic product (GDP) growth of 4.9 per cent for this year and 4.5 per cent for 2019, lower than the 5.9 per cent achieved last year.

RAM in a statement today said this reflects the lingering spillover effects of the US- trade war on the external front, along with less infrastructure investment and lower public-sector spending on home ground in the near term.

“The latter includes our expectation that the government will not favour any expansionary fiscal policy until its finances improve.

“Nonetheless, we expect Budget 2019 to provide better insight on the new administration’s plans. These are pivotal to the formulation of RAM’s final growth projections for 2019,” said RAM’s head of research, Kristina Fong.

Meanwhile, RAM’s head of sovereign ratings Esther Lai said the is expected to retain its overnight policy rate unchanged at 3.25 per cent amid the government’s limited fiscal space, modest forecast at 1.7 per cent to 2.5 per cent, and the need to balance the opposing pressures of growth deceleration and capital outflow bias.

“The country’s economic fundamentals have traditionally been a key rating strength, and remain so. As the expected slowdown in GDP growth is transitory rather than structural, we do not envisage this to affect Malaysia’s sovereign ratings.

“The Malaysian government carries gA2/Stable and seaAAA/Stable ratings by RAM,” she said.

As for the infrastructure projects, RAM said the government is keen to streamline its expenditure, having set its sights on large public concessions and projects, in line with its pre-election manifesto.

RAM’s agribusiness, real estate and construction ratings head Thong Mun Wai said the construction, toll roads and power sectors where government involvement and payments are key features have come under the spotlight after the election.

“These sectors account for a significant chunk of the debt capital market’s outstanding bonds or . As such, any action by the government could have far-reaching consequences on the capital markets’ appetite for the funding of infrastructure development.

“For this reason, we believe that the government will strike a balance between its intentions and any potential impact on the market,” he said.

RAM has also revised the outlook on the retail sector to stable from negative for July 2018, driven by more upbeat consumer sentiment and business confidence as well as the introduction of consumer-friendly measures.

“The MIER Consumer Sentiment Index finally broke above 100 points in second quarter (Q2) 2018, and stayed above 100 in Q3 2018, after having been submerged for 15 consecutive quarters.

“The latest RAM Business Confidence Index readings for Q4 2018-Q1 2019 are also favourable,” notes Kevin Lim, head of consumer & industrial ratings. — Bernama

Source: The Malay Mail Online

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