HSBC maintains Malaysia's GDP forecast

KUALA LUMPUR: HSBC Global Research is maintaining its Gross Domestic Product (GDP) growth forecast for 2014 and 2015 at 5.2 per cent and 5.0 per cent, respectively, saying the pick up in growth will be boosted by positive net exports.

"This year's expansion may appear to be faster than 2013's 4.7 per cent, but sequential growth each quarter should actually be slower.

"We expect average quarterly growth of 0.9 per cent over 2014 versus a 1.2 per cent average for 2013 and a trend pace of 1.1 per cent," the research firm said in a note.

HSBC also said the recovery cycle in Malaysia's exports would be underpinned by higher shipments for both manufactured products and commodities.

Growth, however, would likely be modest, given HSBC's view for modest recovery in the United States and Europe, as well as, stable growth in China.

But, it will likely still outstrip the rise in imports, where gains should be tempered by a noticeable weakening in domestic demand, it added.

Domestic slowdown would likely reflect the impact government fiscal consolidation efforts have on both public and consumer expenditure.

Hike in subsidised fuel prices last September coupled with further fiscal consolidation this year should result in Malaysia's deficit narrowing further to 3.5 per cent of GDP against the 3.9 per cent registered last year.

"As evident by cuts to sugar, fuel and electricity subsidies over the past few months and plans to restructure the revenue base through a six per cent Goods and Services Tax in April 2015, the government remains committed to fiscal consolidation," it added.

On inflation, HSBC expected it to average around 3.2 per cent this year, assuming no changes to fuel prices, and this was in line with Bank Negara

Malaysia's forecast of between 3.0 and 4.0 per cent. -