Page 164 - Malaysia Baharu 2018
P. 164
by public corporations following the inflation projection incorporates some
completion of large-scale projects, cost pass-through from domestic cost
while the expectations for a moderate factors, but the upward impact will be
growth in public consumption reflect offset by the expected lower global oil
the continued reprioritisation of prices and the implementation of price
government spending. ceilings on domestic retail fuel prices.
Underlying inflation, as measured
The external sector is expected to by core inflation, is expected to be
register a more moderate growth. sustained amid the steady expansion
While the export sector will soften in economic activity and in the absence
in line with the more moderate of excessive demand pressure.
expansion in global growth and trade
6 | MALAYSIAN ECONOMY activity, Malaysia’s well-diversified Overall, the domestic growth projection
export structure will contribute to is subject to several downside risks.
sustain gross exports expansion. As a small open economy, the
Gross imports are also expected to unresolved trade tensions between
expand on account of a turnaround the US and PR China, and a slower-
in intermediate and capital imports. than-expected global growth will
Overall, the current account of the affect Malaysia primarily via the
balance of payments is projected to trade and investment channel. The
remain in surplus, albeit narrowing to uncertain pace of the monetary policy
1.5% – 2.5% of GNI. normalisation in the US could heighten
financial market volatility across
On the supply side, all economic emerging market economies, leading
sectors are expected to expand to volatile two-way capital flows and
with the services and manufacturing currency fluctuations. Volatility in
sectors remaining the key contributors global oil prices would also affect
to overall growth. Both the mining export performance and mining sector
and agriculture sectors are projected investment. On the domestic front, a
to record positive growth rates amid re-occurrence of commodity supply
recovery in natural gas production disruptions, partly from unanticipated
and higher palm oil output. Growth in weather patterns, could affect the
the construction sector is expected recovery in the mining and agriculture
to moderate due to the completion of sectors. In addition, the oversupply
large petrochemical projects in the situation in the property market could
civil engineering sub-sector. dampen activity in the construction
sector.
Labour market conditions are
expected to be stable, with continued Malaysia’s strong fundamentals and
employment and income growth, the diversified nature of the economy
underpinned by steady expansion in will help to weather these risks and
services and manufacturing sectors. vulnerabilities while preserving
The unemployment rate is projected macroeconomic and financial stability.
to be relatively unchanged. In the long These strong fundamentals include
run, the rollout of government policies a healthy labour market, stable
such as the tiered levy and social inflation rate, continued surplus in
security contribution for foreign the current account of the balance
workers is a positive step in reducing of payments, deep financial markets
the reliance on foreign labour and as well as a strong financial sector.
spurring the creation of higher skilled, Exchange rate flexibility and sufficient
higher income jobs in the economy. level of international reserves further
enhance the economy’s capability to
Headline inflation is expected to be withstand external shocks. Moreover,
broadly stable, with a projected annual commitment by the Government to
average of 0.7% – 1.7% in 2019. The fiscal, structural and institutional
162
completion of large-scale projects, cost pass-through from domestic cost
while the expectations for a moderate factors, but the upward impact will be
growth in public consumption reflect offset by the expected lower global oil
the continued reprioritisation of prices and the implementation of price
government spending. ceilings on domestic retail fuel prices.
Underlying inflation, as measured
The external sector is expected to by core inflation, is expected to be
register a more moderate growth. sustained amid the steady expansion
While the export sector will soften in economic activity and in the absence
in line with the more moderate of excessive demand pressure.
expansion in global growth and trade
6 | MALAYSIAN ECONOMY activity, Malaysia’s well-diversified Overall, the domestic growth projection
export structure will contribute to is subject to several downside risks.
sustain gross exports expansion. As a small open economy, the
Gross imports are also expected to unresolved trade tensions between
expand on account of a turnaround the US and PR China, and a slower-
in intermediate and capital imports. than-expected global growth will
Overall, the current account of the affect Malaysia primarily via the
balance of payments is projected to trade and investment channel. The
remain in surplus, albeit narrowing to uncertain pace of the monetary policy
1.5% – 2.5% of GNI. normalisation in the US could heighten
financial market volatility across
On the supply side, all economic emerging market economies, leading
sectors are expected to expand to volatile two-way capital flows and
with the services and manufacturing currency fluctuations. Volatility in
sectors remaining the key contributors global oil prices would also affect
to overall growth. Both the mining export performance and mining sector
and agriculture sectors are projected investment. On the domestic front, a
to record positive growth rates amid re-occurrence of commodity supply
recovery in natural gas production disruptions, partly from unanticipated
and higher palm oil output. Growth in weather patterns, could affect the
the construction sector is expected recovery in the mining and agriculture
to moderate due to the completion of sectors. In addition, the oversupply
large petrochemical projects in the situation in the property market could
civil engineering sub-sector. dampen activity in the construction
sector.
Labour market conditions are
expected to be stable, with continued Malaysia’s strong fundamentals and
employment and income growth, the diversified nature of the economy
underpinned by steady expansion in will help to weather these risks and
services and manufacturing sectors. vulnerabilities while preserving
The unemployment rate is projected macroeconomic and financial stability.
to be relatively unchanged. In the long These strong fundamentals include
run, the rollout of government policies a healthy labour market, stable
such as the tiered levy and social inflation rate, continued surplus in
security contribution for foreign the current account of the balance
workers is a positive step in reducing of payments, deep financial markets
the reliance on foreign labour and as well as a strong financial sector.
spurring the creation of higher skilled, Exchange rate flexibility and sufficient
higher income jobs in the economy. level of international reserves further
enhance the economy’s capability to
Headline inflation is expected to be withstand external shocks. Moreover,
broadly stable, with a projected annual commitment by the Government to
average of 0.7% – 1.7% in 2019. The fiscal, structural and institutional
162
