KUALA LUMPUR, Nov 17 2018 : The lower gross domestic product (GDP) growth posted in the third quarter (Q3) of 2018 at 4.4 per cent compared to the 4.5 per cent in Q2 was due to lower retail consumption and lower government fiscal spending, says an analyst.
OANDA Head of Trading Asia-Pacific Stephen Innes said with some projections of the Q3 GDP ranging from 4.6 per cent to over 5 per cent, this would be a huge challenge for the government to overcome in the next quarter.
“With lower oil prices and export value, the GDP could struggle to achieve the 4.8 per cent yearly growth, but there are steps that could be taken by the government and the central bank (BNM),” he told Bernama in response to the Q3 GDP announcement.
He also said with the government’s infrastructure projects in limbo, the government would need a surprising injection of foreign money to boost the Q4 GDP growth.
Innes added that the GDP figure would put pressure on the currency and it would be dangerous if BNM does not take any measures to cap the fall.
“From this trend, the ringgit would be in a rough patch over the next six to nine months and it would test the 4.20 benchmark sooner and hit the 4.25 level by early 2019 due to the strengthening of the US dollar,” he said.
The decline in inflation to 0.5 per cent in Q3 2018 from 1.3 per cent in Q2 was mainly due to the zerorisation of the Goods and Services Tax and would only be temporary, he noted.
“For this quarter, the inflation was down as it was a tax-free period, but in the next quarter, the inflation is expected to go up,” he said.
He added that with the current inflation rate, BNM is in no rush to raise interest rates.
BNM has kept the Overnight Policy Rate (OPR) unchanged at 3.25 per cent for the fifth consecutive Monetary Policy Committee meeting since raising it 25 basis points back in January this year. – Bernama