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IMF projects Malaysia's GDP growth at 4.7% in 2019, inflation to rise above 2%

 

KUALA LUMPUR (March 12): The International Monetary Fund (IMF) forecasts Malaysia’s Gross Domestic Product (GDP) to grow at 4.7% 2019 — the same pace as it had projected in 2018.

IMF commented that Malaysia’s medium-term growth outlook “remains favourable” although downside risks remain for the “highly open economy” stemming primarily from the external environment, including oil price, rising protectionism and slowdown in China.

“Domestically, contingent liabilities could necessitate additional measures to ensure medium-term fiscal sustainability,” it said in a statement yesterday.

The growth pace is expected to pick up to 4.75% over the medium term, said IMF.

IMF projected inflation rise to above 2% in 2019 compared with 1% estimated for 2018, as the effect of the Goods and Services Tax (GST) removal dissipates.

The fund, however, warned of the risk of lower investment and economic growth, if the Government’s reform efforts are hindered which will in turn undermine confidence.

IMF executive board expressed the views following the conclusion of its 2019 bilateral discussion with Malaysia on Feb 15, as required under Article IV of IMF’s Articles of Agreement, it said.

Recommendations by the IMF to the Government include to continue safeguarding growth and financial stability while implementing “credible” macroeconomic policies.

“[IMF] directors agreed with the planned gradual pace of fiscal consolidation in 2019 and over the medium term, to support debt reduction and strengthened fiscal buffers,” it said.

It also encouraged the development of a strengthened fiscal framework that would “rely on credible revenue and expenditure measures”.

Noting Malaysia’s low tax revenue ratio, IMF emphasised that revenue mobilisation should be a priority — not only to support medium-term consolidation, but also to help finance needed expenditure to achieve Government priorities identified under the Mid-Term Review of the 11th Malaysia Plan. — theedgemarkets.com

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