KUALA LUMPUR (Feb 14): Economists have described Malaysia's 2018 gross domestic product (GDP) growth of 4.7 per cent as healthy, although it was lower than the 5.9 per cent the country recorded in 2017.

Alliance Bank Malaysia Bhd chief economist Manokaran Mottain said the 4.7 per cent growth was still considered healthy for a developing country like Malaysia, compared with 4.2 per cent expansion the country recorded in 2016 and 4.7 per cent in 2013.

“As long as the growth is still above the three per cent level, the economy may yet to experience a recession,” he told Bernama.

Similarly, Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said Malaysia’s economic growth was higher in Q4 2018 compared with 4.5 per cent and 4.4 per cent in Q2 2018 and Q3 2018 respectively, primarily driven by consumer spending which has been growing at above-trend level.

“The turnaround in exports to 1.3 per cent in Q4 after contracting 0.8 per cent in the preceding quarter has also helped the overall growth in the final quarter of last year," he said.

RHB Research Institute economist Peck Boon Soon said that although the overall 2018 GDP growth represented a slowdown in economic activities, it was still considered healthy as it was underpinned by stronger growth in private consumption and partly boosted by three months of tax holiday.

However, the growth was hampered by a slowdown in exports and private investment with slackened public spending due to fiscal consolidation to contain the Budget deficit exacerbating the matter, he said.  

Meanwhile, Malaysian Institute of Economic Research (MIER) executive director Emeritus Professor Dr Zakariah Abdul Rashid said last year’s GDP growth could be better, if public confidence was not impacted by the structural reform that took place.

"Malaysia is currently undergoing structural reform, so when we decided to do that, the economy will slightly slow down initially, but we will be experiencing more sustainable growth in the long run," he said.

On the implications of external factors, Malaysia as an open economy, according to Manokaran, was more susceptible to external headwinds such as the prolonged US-China trade war and a slowdown in global growth, coupled with domestic political uncertainties due to the change of government and fiscal reformations.

“We hope that the newly formed Economic Action Council (EAC) will come up with economic strategies that can steer the economy towards a stronger path and growth," he said.

Echoing Manokaran's view, Zakariah said the setting-up of the EAC was good as all related Ministries and experts would join forces and solve the complex economic problems facing the country.

"Our economic problem is complex, and it cannot be solved by an individual Ministry, be it the Ministry of International Trade and Industry, Finance Ministry or the Economic Affairs Ministry," he said.

He noted that the council would not solve the problem in the short term, but would improve the structure of the economy in the long term.

"Since we are not embracing National Transformation 2050 (TN50) initiated by the previous Government anymore, the Government should come out with some other vision to show the clearer direction for the business community or decision makers for them to move forward," he suggested.

Meanwhile, Peck suggested for Malaysia to have a look at rejuvenating its export engine, given the fiscal constraint it faces.

The country he said, had also been relying on private consumption to drive its economic growth for many years.

“This is as the domestic market size is not big enough to support more robust economic growth for the country, a revival of export engine is important to bring back the country's private investment in order to sustain stronger income and economic growth of the country,” said the RHB Research Institute economist.

He added that compared with GDP recorded by other ASEAN countries such as the Philippines (6.8 per cent), Vietnam (7.1 per cent), Indonesia (5.17 per cent), Thailand (4.2 per cent projection),  the data did show that Malaysia lagged behind its neighbours.

Most economists projected next year’s GDP growth to moderate around 4.5 to 4.6 per cent.

“We expect first quarter 2019 GDP to expand at 4.4-4.6 per cent, while full year growth to moderate to 4.5 per cent on the back of slower public spending and moderation within the manufacturing and mining sectors,” said Manokaran.

Meanwhile,  Zakariah pointed out that internal factors such as public confidence, especially in terms of the current structural reforms which involved some adjustments in the macroeconomic management, along with external factors like the trade tension between US and China and crude oil prices, would weigh on the GDP to expand at a slower pace of 4.5 per cent in 2019.

Similarly, Mohd Afzanizam said the risk to growth is tilted on the downside due to the trade tensions and tightening of global financial conditions.

“We have seen the Global Manufacturing Purchasing Managers Index consistently on a declining trend, suggesting manufacturers are very cautious in their outlook. This would have an impact on labour hiring decisions and capital expenditure.

“At the same time, we expect growth on consumer spending to normalise in 2019 after experiencing an above-trend growth in 2018 and 2017,” he said.

As such, he viewed that it is important for the Government to speed up its development expenditure in order to resuscitate growth and to inject confidence in the economy.

Based on the Budget 2019 announcement, development expenditure (DE) for this year is slated to be at RM54.7 billion which is higher than the 2010-2017 average of RM44.4 billion.

The DE has been budgeted and therefore, the timing for disbursement is very critical for confidence building, he said.

“We are maintaining our 2019 GDP forecast of 4.5 per cent in view of uncertainty in the external front as well as normalisation in consumer spending amidst cautious investment activities by the private and public sector,” he said.

Meanwhile, Peck said RHB Research was also looking at moderate economic growth this year at around 4.6 per cent, given the challenging global economic environment and the constraints faced by the government to increase its expenditure.

"The situation will likely be compounded by a sluggish housing sector and soft commodity prices that are important in driving the domestic economy," he added.