Malaysia's economy is expected to grow by 4.2 per cent this year, OCBC Bank said in its Global Outlook 2017 Report today.

It said that although domestic consumption has been supporting the growth, the economy remained export-dependent than its regional peers such as Indonesia.

However, it said, there could be potential downside tilt to the growth, including the impact of Donald Trump's presidency on the economy globally.

"With external risks on the rise, it would be ideal if Bank Negara Malaysia reduce its policy rates to give more oomph for domestic demand as a counter-balance.

"From a purely domestic angle, there is enough space especially with the relatively low inflation rate," it said.

In September 2016, the Consumer Price Index headline inflation printed just 1.5 per cent year-on-year.

Earlier, the central bank projected the CPI "to remain relatively stable" in 2017 given the low global energy and commodity prices, and generally subdued global inflation.

OCBC Bank forecast Bank Negara to keep its Overnight Policy Rate unchanged at three per cent for the whole of 2017.

The first Monetary Policy Committee Meeting for this year is set to be held on Jan 18 and 19.

Malaysia's gross domestic product last year grew by 4.3 per cent in the third quarter, four per cent in second quarter and 4.2 per cent in first quarter. -- BERNAMA