KUALA LUMPUR: RHB Investment Bank Bhd has maintained its gross domestic product (GDP) growth forecast for next year at 4.3%, on the back of a further moderation in growth as export activity is expected to remain subdued.
“We keep our real GDP growth forecast for 2020 unchanged, as the protracted US-China trade tensions remain a main drag to global demand and the country’s exports despite a potential de-escalation,” the investment bank said in report on Dec 4.
However, it pointed out that stronger domestic demand will help to prop up growth, in line with the higher allocation for development expenditure and resumption of infrastructure spending that is likely to spill over into inducing higher private investment.
“The challenging global economic environment has prompted Malaysia to rely more on domestic demand to prop up growth.
“This is likely to be boosted by a recovery in public investment as well as improvement in private investment, while private consumption growth is expected to be resilient,” the investment bank noted.
It also believed that the government would slow down the pace of its fiscal consolidation with additional spending of 0.2% of GDP via development expenditure to stimulate construction growth.
As a result, the budget deficit will narrow to 3.2% of GDP in 2020 instead of the earlier target of 3% and compared with 3.4% this year, while rising inflation is expected to be manageable.
As growth is likely to weaken, the investment bank anticipated Bank Negara Malaysia to cut its overnight policy rate (OPR) by 25 bps in 2020 to complement the fiscal stimulus spending.
“We believe BNM is likely to cut the OPR by 25 basis points to stimulate growth in 2020 while the ringgit is expected to appreciate amid a weakness in the US dollar,” it said. – Bernama
