Deutsche Bank Asia-Pacific chief economist Michael Spencer said growth would hold up reasonably well in the first half of the year but slow down at the end of the year.
“I think it will be well in 2019 as the growth will remain (probably) above 5%,” he told reporters at the World Capital Markets Symposium, organised by the Securities Commission.
Spencer was one of the panellists during a one-hour session titled “Market Outlook 2018: What Lies Ahead?”.
He said however that Malaysia needs to prepare for a gradual slower growth when the US interest rate starts to bite its economy.
Spencer also agreed with Bank Negara Malaysia’s (BNM) decision to increase the interest rate, saying he expects the central bank to raise the rates twice in the next 12 months.
“I would prefer the central bank to be more forward-looking and I think the interest rate announcement was with the view that inflation will fall soon, and I think it will,” he said.
BNM, via its monetary policy committee (MPC) meeting last month, decided to raise the key rate as the economy was on a steady growth path.
“At the same time, the MPC recognised the need to pre-emptively ensure that the stance of monetary policy is appropriate to prevent the build-up of risks that could arise from interest rates being too low for a prolonged period of time,” it said.
BNM said looking ahead, the strong growth momentum was expected to continue in 2018, sustained by stronger global growth and positive spillovers from the external sector to the domestic economy.
Asian currencies to trade weaker
On the ringgit, Spencer said there would be another shake-up in the market in the second quarter of the year due to the inflation in the US.
“Inflation in the US is going to shoot up between April and August and that’s historical reason based on fact last year.
“The Asian currencies, including the ringgit, will likely trade weaker. However, we are just talking about a couple of percentage lower so it is not that significant,” he said, adding that the local note could reach the 3.80 level soon.
Another panellist, BNP Paribas Asset Management senior economist Chi Lo, said the renminbi had been strong and would likewise influence the Asian currencies to strengthen.
“In my point of view, I think the ringgit is undervalued. There is indeed an increasing correlation between the Asian currencies’ movements and the renminbi against the US dollar and the euro.
“If the research is a good guide, we can expect that overall the ringgit to appreciate against the US dollar,” he said.