KUALA LUMPUR: The Malaysian Institute of Economic Research (Mier) has maintained its projection of 4.2% growth in the country’s real gross domestic product (GDP) this year as the external sector remained sluggish.

Its executive director, Dr Zakariah Abdul Rashid, said for the third quarter, the economy would likely register between 4% and 4.1% growth.

He said the private sector was expected to continue to take the lead to spearhead economic growth amid a weaker external demand.

“The growth will be driven largely by private sector expenditure as liquidity condition improves,” he told reporters on the Malaysian Economic Outlook in Kuala Lumpur on Tuesday.

Zakariah said Malaysia’s GDP grew by 5% last year and for 2017, real GDP growth would likely edge up moderately to between 4.5% and 5.5% on improved export demand.

He said Bank Negara Malaysia (BNM) was expected to continue pursue an accommodative monetary policy favouring businesses as household debts were creeping up.

The expansionary monetary policy was expected to continue for the rest of the year as well as for next year since the price levels were kept under control, he said.

Zakariah said BNM was expected to maintain the overnight policy rate at 3% until year-end after cutting it in July to spur domestic demand in the environment of a continued moderation of global economy.

BNM would not likely cut interest rates in the short term as there was sufficient impetus for the economy to show its performance, he said.

On fiscal deficit, Zakariah said, the target of reducing it to 3.1% this year was achievable given the Government’s committed efforts.

“I have no doubt at all. (As seen) in the previous budget, when it comes to fiscal deficit, the Government is very serious about it,” he said.

He said the the Government aimed to narrow the fiscal deficit to 3.1% of the GDP from 3.2% recorded in 2015.

Economists expected it to improve further to 3% in 2017, he said.

On trade, Zakariah said, Mier has revised downwards Malaysia’s net export annual growth from 1.2% projected in April to a contraction of 0.5% on account of slower export growth rate.

“Imports are expected to grow stronger at 2.9% this year against 1.2% registered last year, mostly anticipated for immediate and capital goods which is favorable for future production and exports. 

“We maintain our outlook on the external sector as there is no significant development influencing Malaysia’s trade flow,” he said. - Bernama