Malaysia's economy likely to grow higher in 2017, target to be revised

"A new number (target) will be announced by Finance Minister in the (upcoming) Budget.

"We at Bank Negara are working with the ministry and our forecast is that it (the figure) will certainly be more than 4.8 per cent," he said during the announcement of the country's second-quarter (Q2) Gross Domestic Product (GDP) performance here today.

Malaysia's economy has remained on an upward momentum since Q2 2016, with a GDP growth of 5.8 per cent in Q2 2017 compared to 4.0 per cent in the same quarter last year.

For the six-month period, the economy expanded by 5.7 per cent.

The expansion in Q2 2017, which is better than the 5.6 per cent registered in the first quarter of 2017, was boosted by solid growth in gross export, services and manufacturing sectors, as well as private investment.

Muhammad expects domestic consumption and export to increase further in the second half of this year (H2 2017) on improved market sentiment globally, as reflected in the strong net inflow of RM7.3 billion in Q2 2017.

In addition, he said the upcoming General Elections would help contribute to higher consumer consumption in the remaining quarters.

"We have seen foreign investors coming back to our bond market as well as foreign direct investment," he said, adding there was no 1Malaysia Development Bhd factor in the market that affected sentiment in Q2 2017.

Portfolio investment by non-residents recorded a net inflow of RM18.8 billion mainly due to the resumption in purchases of Malaysian Government Securities and higher participation in the equity market.

Muhammad said investors sentiment generally improved during Q2 2017, supported by the announcement of initiatives to develop the onshore financial market, stronger ringgit performance, expectations of better corporate earnings outlook and domestic growth prospects.

The local currency has strengthened during the quarter in review, which reflected the country's economic fundamentals, he said.

He added that the inflation of 4.1 per cent in Q2 2017 would likely moderate to a range of 3.0 per cent 4.0 per cent in H2 2017, to reflect the waning effect of global cost factors.