JAKARTA - IHS Global Insight Asia-Pacific chief economist Rajiv Biswas issued updates and commentary on Malaysia’s latest economy. Following is the key highlights:
Key Points:
- The Malaysian 2017 Budget estimated that real GDP growth in 2016 would be in the 4.0% to 4.5% range, with GDP growth improving to the 4.0% to 5.0% in 2017.
- The 2017 Budget is fiscally conservative, aiming to reduce the fiscal deficit from 3.1% in the 2016 fiscal year to 3.0% in the 2017 fiscal year. The government debt to GDP ratio has been reduced to 53.2% of GDP, highlighting the government’s commitment to maintaining fiscal prudence.
- The manufacturing sector is expected to be an important contributor to the improving macroeconomic outlook for 2017, with manufacturing output forecast to grow by 4.1% in 2017, led by the electrical and electronics industry.
- Export growth is forecast to pick up from 1.1% in 2016 to 2.7% in 2017, boosted by stronger exports of electrical and electronic exports as well as improving commodities exports.
- The improvement in average oil and gas prices in 2017 compared to 2016 is a positive factor helping to improve the outlook for Malaysian exports as well as Malaysian fiscal revenues in 2017. LNG export volumes are expected to be boosted by 1.2 million tonnes, helping to boost overall oil and gas exports.
Outlook:
The 2017 Budget maintains fiscal discipline with the overall fiscal outlook expected to be gradually improving over the medium term, helped by improving oil and gas prices. IHS Global Insight forecasts that Brent crude oil prices will rise from an average of US$43 in 2016 to US$ 52 in 2017, which will underpin a gradual improvement in Malaysian fiscal revenues from oil and gas.
The fiscal outlook for Malaysia is forecast to improve further in 2018, as average Brent crude oil prices rise to US$ 57 for calendar year 2018. Overall, this will support a gradual improvement in the macroeconomic outlook for Malaysia, with IHS Global Insight forecasting that real GDP growth will improve from around 4% in 2017 to 5% in 2018 and 5.2% in 2019. (*)