The World Bank expects Malaysiaâs economic growth to slow down to 4
he World Bank expects Malaysia's economic growth to slow down to 4.7% this year, as low oil prices dampen investment in the oil and gas sector and credit growth continues to slow.
In its latest Global Economic Prospects (GEP) report, the bank also said private consumption would moderate due to the introduction of the goods and services tax (GST).
'Capital expenditures in the oil and gas sector, a key driver of strong investment growth in the past three years, will be delayed by lower oil prices. An acceleration in growth to 5% is expected in 2016-17, as some normalisation occurs,' it said.
On growth for the East Asia and Pacific (EAP) region, the bank forecast an easing to 6.7% this year and growth to remain stable in 2016. Meanwhile, growth in China is projected to moderate to 7.1% this year, 7.0% next year and 6.9% in 2017, reflecting policy efforts to achieve a more sustainable growth path.
'The continued slowdown in China should be gradually offset by a pick-up in the rest of the region, which is benefiting from the strengthening recovery in advanced countries, low energy prices, improved political stability, and ample liquidity in global financial markets despite an expected gradual tightening in the United States,' the World Bank said.
'EAP countries will mostly benefit from low fuel prices, but the impact will vary across countries, reflecting the magnitude of net fuel imports, energy intensity of production, and the share of oil and gas in energy consumption.'
In the region excluding China, the World Bank forecast growth to reach 4.9% this year and 5.4% in 2016 and 2017, driven by the large ASEAN economies.
The World Bank noted that the GST introduced in Malaysia in April would broaden the base of federal revenues and diversify it away from volatile oil and gas revenues.
'The vast majority of the budget subsidies have been eliminated. Policies should focus on building the mechanisms to avoid re-introducing subsidies when oil prices go up,' it said. (dmr)(++++)
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