HSBC has reduced its 2012 gross domestic product forecast for Malaysia to 3.7 per cent from five per cent due to slower global growth which will continue to dampen exports.
HSBC said it, however, expected the domestic demand to hold up relatively well, supported by a solid employment outlook and monetary and fiscal stimulus as well as more projects would commence under the Economic Transformation Programme, and help to shore up the economic growth.
It said the global cooling should help reduce inflationary pressure by slowing growth and reining in international commodity price inflation.
"Hence, we expect inflation in Malaysia to moderate, although there are upside risks to food inflation owing to the floods in Thailand and the potential farm labour shortages caused by crackdown on illegal workers," it said.
The bank said given the weaker global economic conditions, Bank Negara Malaysia has started to sound more dovish of late.
"We expect it to take action during the first half of 2012 and embark on a 'mini' easing cycle before guiding rates back up again the following year," it said.
HSBC said the government's target deficit reduction this year of 4.7 per cent from an estimated 5.4 per cent for 2011 may prove difficult to achieve, given the downside risks to growth and oil prices. - Bernama
HSBC said it, however, expected the domestic demand to hold up relatively well, supported by a solid employment outlook and monetary and fiscal stimulus as well as more projects would commence under the Economic Transformation Programme, and help to shore up the economic growth.
It said the global cooling should help reduce inflationary pressure by slowing growth and reining in international commodity price inflation.
"Hence, we expect inflation in Malaysia to moderate, although there are upside risks to food inflation owing to the floods in Thailand and the potential farm labour shortages caused by crackdown on illegal workers," it said.
The bank said given the weaker global economic conditions, Bank Negara Malaysia has started to sound more dovish of late.
"We expect it to take action during the first half of 2012 and embark on a 'mini' easing cycle before guiding rates back up again the following year," it said.
HSBC said the government's target deficit reduction this year of 4.7 per cent from an estimated 5.4 per cent for 2011 may prove difficult to achieve, given the downside risks to growth and oil prices. - Bernama
