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Najib: Malaysia heading in the right direction

Malaysia is heading in the right direction as attested to by the International Monetary Fund’s (IMF) report on the country’s real gross domestic product (GDP) growth projection for 2017, Prime Minister Najib Razak said.

He was referring to a recent IMF report which stated that Malaysia’s real GDP growth has surprised on the upside and is projected at 5.5–6.0 percent for 2017, driven by domestic demand and robust exports.

“Proof that we are heading in the right direction,” Najib said in his Twitter post.

IMF stated that the authorities’ comprehensive structural reform agenda, laid out in the 11th Malaysia Plan, which focused on supporting higher productivity and improving labour market outcomes, would help boost medium-term growth and improve living standards.

“Priority should be given to policies to encourage female labour market participation and reduce skill mismatches,” it said.

IMF team, led by Nada Choueiri, visited Kuala Lumpur and Putrajaya from Nov 28 until Dec 8, 2017, to conduct discussions for the 2018 Article IV Consultation with Malaysia.

The team exchanged views with senior government and Bank Negara Malaysia (BNM) officials, and met with representatives from the private sector and think tanks.

In a statement after the conclusion of the visit, Choueiri stated that the Malaysian economy has shown resilience in recent years and continues to perform well.

“However, core inflation and credit growth are contained. Headline consumer price inflation has gone up on higher oil prices and is projected at close to four percent for 2017. On the external side, the current account balance surplus has increased, helped by strong exports,” Choueiri said.

“Real GDP growth is projected at 5.0–5.5 percent in 2018. While the cyclical upturn will begin to normalise, momentum in activity is expected to remain strong in the first half of the year, supported by domestic demand and continued strength in global trade.

“Headline inflation is expected to decline to the 3.0–3.5 percent range on lower impact from global oil prices.

“Risks to the near-term outlook are balanced. Strong global demand for electronics, which has benefited Malaysia’s exports, could last longer than anticipated, while downside risks include policy uncertainty in advanced economies and tighter global financial conditions. Going forward, striking the right balance in policies will be key.

“The government’s planned pace of fiscal consolidation for 2017-2018 is appropriate, and will help build buffers and maintain financial market confidence.

“In the medium term, fiscal policy should follow a gradual consolidation path, and the composition of adjustment could be improved to make it more revenue based and to make room for the structural reforms and increased social spending for inclusive growth.

“Medium-term fiscal targets should be better communicated. The current accommodative monetary policy stance with a bias towards reduced accommodation is appropriate, given above–potential growth but still stable core inflation.

“The financial sector is resilient. Bank profitability and liquidity are sound, and corporate access to credit remains healthy. While housing price growth has moderated, pockets of risks exist in exposures to household mortgages and the property development sector. However, their impact on macro-financial stability appears contained.

“Priority should be given to policies to encourage female labour force participation; improve the quality of education and skills; improve vocational and technical training to reduce labour market skill mismatches; encourage research and development; and update public infrastructure,” she said.

- Bernama

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