Malaysia's 2016 economic growth rate expected to be challenging

Malaysia's 2016 economic growth rate is expected to remain challenging, fueled by the volatility of the global financial market, the drop in commodity prices, the strengthening US dollar as well as the economic slowdown in China.

According to the 2015/2016 Economic Report, the national economy is expected to grow 4 to 5 percent, namely driven by domestic demand.

Private sector spending will remain a significant contributor as it is expected to be the main component of domestic demand with an expected growth rate of 6.4 percent next year.

Private sector consumption contributed 3.9 percent to the country's Gross Domestic Product (GDP) in the first half of 2015.

While private sector investment totaled RM108.5 billion within the same period with 81 percent being local investments.

Initiatives will be undertaken by the government to increase consumption through the increase of disposable incomes by generating more jobs and curbing the rise in living costs.

While from an investment standpoint, iniatives will also be taken to restore investor confidence through fostering of a conducive investing environment.

Despite the depreciation of the ringgit, inflation is expected to remain low as a result of the drop in global crude oil prices the slowdown and the wearing down of the effects of the Goods and Service Tax (GST) implemented in April.

The inflation rate for the first 8 months of the year saw a growth rate of 1.9 percent compared to 3.3 percent during the same period in 2014.

For 2016, inflation is forecasted to be in the range of 2 to 3 percent resulting from the depreciation of the local currency which affects import costs.

While the fiscal deficit is expected to stand at 3.1 percent for 2016 as opposed to the 3.2 percent target set for the current year.

As for export, the main concern is the inability of local exporters to strengthen their presence in the global supply chain namely in the technology sector as well as areas of new growth.

This includes the under-utilization of the free trade agreements ratified in the past.

2016 therefore, looks a challenging year for Malaysia especially under the lense of strengthening the domestic economy's resillience and ensuring the sustainability of public finance.