KUALA LUMPUR: Kenanga Investment Bank expects Malaysia’s economy to grow at a moderate 5.1 per cent of the gross domestic product (GDP) this year instead of its earlier projection of 5.5 per cent.

Its research head, Chan Ken Yew said the lower GDP projection was largely due to uncertainties over the impact of Goods and Services Tax (GST) and lower external demand.

“However, this would be mitigated by domestic spending on MRT2, LRT3, and high-speed rail projects,” he told reporters at Kenanga’s 2015 Market Outlook, GST and Good Feng Shui Seminar here.

Chan said the contributing factors to the moderate growth would come from private investment, exports and construction.

He said with the expectation of the US economy, uncertainties in the Eurozone, China and Japan would weigh on the external sector.

Coupled with a high base, exports growth is projected to slow to around 5.2 per cent in 2015, he said.

“However, from the second half of 2015 (2H15) onwards, advanced economies are expected to perform better as stimulus measures take hold and spur growth,” added Chan.

On the ringgit outlook, he said the narrowing current account surplus along with the prospect of the US Federal Reserve raising its rates from 2H15 onwards would weigh on emerging market currencies including the ringgit.

“We reckon that the local note to be around 3.43 (against the US dollar) for FY15 if oil price sustains to a better level,” said Chan, adding that the oil price may recover in the 2H15. — Bernama