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Malaysia's economy to get boost from exports, consumption

Central bank sees an expansion of 5.5-6% in 2018, up from 5-5.5% the govt had forecast in October

Kuala Lumpur

MALAYSIA'S economy is expected to grow at a faster pace than forecast earlier thanks in part to improving global demand, the central bank said, but it warned of risks to the outlook from monetary tightening in advanced nations and heightened trade protectionism.

In its annual report released on Wednesday, Bank Negara Malaysia said private consumption will also help to boost growth, forecasting 5.5-6 per cent expansion in 2018, up from 5-5.5 per cent the government had forecast in its annual budget in October last year.

The nation has enjoyed an export boom, while public spending on infrastructure gave an extra fillip to GDP which was up 5.9 per cent in 2017 - its best in three years.

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In January, the central bank raised interest rates for the first time in over three years, joining the likes of the Federal Reserve and the European Central bank in tightening monetary policy. The Malaysian rate hike signalled confidence in the economy, and came well ahead of the general elections that must be held by August.

"Malaysia's export performance will be supported by favourable demand from major trading partners, continued expansion in the global technology upcycle and broadly sustained commodity prices," Bank Negara said.

Malaysia's gross exports were expected to climb 8.4 per cent this year, slowing from 2017's preliminary figure of 18.9 per cent growth. It cautioned about risks to exports from any unfavourable shifts in monetary and regulatory policy in advanced economies, rising trade protectionism among major trading partners, and the potential for China's economy to moderate more than expected.

The central bank said these same global factors could rekindle volatility in the ringgit, which has continued to strengthen in 2018.

Governor Muhammad Ibrahim said domestic demand underpinned the forecast growth upgrade. "For our exports this year, IMF projected 3.9 per cent (global economic) growth and we will benefit from that, provided there are no trade wars, volatility in financial markets and no surprises on monetary policies," he told reporters. REUTERS