Malaysia GDP growth likely to register 5.0 pct in 2017, says DBS Bank

Malaysia's gross domestic product (GDP) is expected to register 5.0 percent in 2017, up from the previous forecast of 4.5 percent. Despite the drag from net exports, overall GDP growth for the year will still turn out stronger than previously anticipated.

Not only has the entire growth trajectory been lifted by the first quarter showing, underlying domestic fundamentals are also expected to remain resilient. Private consumption and investment will remain the key drivers of Malaysia’s domestic growth story. The factors supporting these two engines are internal by nature and remain highly conducive, DBS Bank reported.

First quarter GDP growth registered 5.6 percent y/y, significantly stronger than expected. Domestic growth was the main driver and accounted for 6.8 percentage points to overall GDP growth. Net export has turned negative as a surge in imports (12.9 percent) has offset what should have been a good showing in exports (9.8 percent). On the margin, growth momentum accelerated by 7.5 percent q/q saar. This is the strongest sequential growth since Q4 2012.

"Factoring in the recent upside surprises in inflation, we will revise up our full-year inflation forecast to 3.7 percent in 2017 but maintain our projection of 2.5 percent in 2018," the report commented.