Malaysian central bank eyes slower economic growth this year

KUALA LUMPUR, March 27 (Xinhua) -- Malaysian Central Bank on Wednesday downgraded its forecast for the economic growth this year to 4.3 percent to 4.8 percent, from earlier forcast of 4.9 percent.

The bank's governor Nor Shamsiah Mohd Yunus told a press briefing that private sector spending, capacity expansion and commodity recovery will drive the growth this year.

However, downside risks remain mainly from global slowdown and tightening in global financial market conditions, she added.

Malaysian economy grew at a slower pace of 4.7 percent last year from 5.9 percent in 2017 amid policy uncertainties and supply disruption in the mining and agriculture sectors.

According to the bank's latest annual report, domestic demand will remain the anchor of growth this year, underpinned by continued expansion in private sector activity.

Private consumption growth is projected to moderate to 6.6 percent this year, from 8.1 percent last year, as household spending is expected to normalize.

Private investment growth is anticipated to improve to 4.9 percent this year, from 4.5 percent last year, supported by investment projects in the manufacturing and services sectors.

Due to a decline in government spending, public consumption growth is projected to slow to 1.2 percent, from 3.3 percent last year.

Public investment is expected to contract by 7.1 percent, due mainly to lower investment by public corporations.

On the supply side, the services and manufacturing sector will remain the two major drivers this year, with expected growth rate of 5.7 percent and 4.8 percent. Last year, services and manufacturing grew at 6.8 percent and 5 percent, respectively.

Growth in construction sector growth is expected to moderate to 3 percent this year, from 4.2 percent last year, due to the completion of large petrochemical projects and subdued property market.

Growth in both the mining and agriculture sectors is projected to register a turnaround this year, with 0.8 percent and 2.8 percent respectively, driven by the recovery in natural gas production and palm oil production.

Meanwhile, the central bank expects the country's exports growth to slow down to 3.4 percent this year, from 6.8 percent last year, due the significant impact of the trade tensions and moderating demand from major economies.

Meanwhile, the headline inflation this year is expected to average between 0.7 percent to 1.7 percent amid lower global oil prices.

"Recent negative headline inflation due mainly to lower fuel prices, not a sharp deterioration in demand conditions," said the central bank.

Malaysia's inflation fell 0.4 percent year-on-year in February, after recorded a contraction of 0.7 percent in January.