KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) has reduced its forecast for Malaysia’s GDP growth this year to 4.2 per cent from 4.7 per cent, citing weak exports and a slowdown in China’s economy.
The economic research non-profit’s executive director Datuk Dr Zakariah Abdul Rashid said exports indicated improvement in the first quarter this year, but were insufficient to accelerate growth. Compounding the problem is China’s deteriorating market.
“For the first few months, exports and imports are good. There is trade surplus but the volume still low and won’t be able to push growth as how we anticipated.
“There are also some elements of slowdown in China,” Zakariah told reporters when explaining MIER’s decision to revise its forecast.
The GDP growth of China, a major trading partner for Malaysia, slowed down to 6.9 per cent last year, its worst performance in 25 years.
Malaysia’s exports to China is valued at US$33.4 billion (RM131 billion), or 12 per cent of total export value. It is the country’s second biggest trading partner after Singapore.
Zakariah also said there is little room for government incentives to boost spending, which could stunt domestic growth.
MIER said it expects private consumption to increase by 0.1 percentage point to 5.2 per cent for 2016.
Zakariah added that first quarter data has indicated slight improvement, noting the ringgit’s bullish performance and improved oil price.
“We can see sentiment improving. I think last year there was a lot of overreacting,” he said referring to the ringgit’s drop throughout the third and fourth quarter last year.
“We can’t discount the element of overshooting but as time pass we have to adjust ourselves,” he added.
