Moderate growth in 2015 – high base effect, GST implementation and a general weak global economy means a more moderate growth of 5.1% in 2015 from an expected 5.8% in 2014. Main contributors to growth will be from construction and some exports demand from the USA. By year-end however, rebound in other major economies will help boost exports.

Consumption pullback – Inflation will be pressured by cost-push factors, mainly the GST. However, lower oil prices will help mitigate the effect though overall consumption is expected to moderate for most of the year.

Fiscal consolidation – less likely to see any form of fiscal consolidation next year as petrol is now on a managed float system. This will make it easier to hit the budget deficit target of 3.0%. However, there is some revenue threat from the oil & gas revenue due to sharply lower crude oil prices.

Inflation to stay above LT average – inflation is expected to be above the long term average, likely to average around 4.0% in 2015 due to cost-push factors from the GST implementation.

BNM to play passive role – the central bank is likely to be a passive observer in 2015 amidst growing divergence of central banks’ policy globally. However, there is a possibility of a hike at the very end of the year if the economy rebounds significantly enough.

Ringgit to trade weaker – due to the strength of the US$, USDMYR is to average weaker in 2015 (around 3.43 average). However, with global recovery and a rebound from GST effects, the ringgit ought to perform better by year-end.

Risk to growth – there are worries about the effects of the GST being more severe than expected (ala. Japan) as it is riddled with uncertainties. The global economy may also take longer than expected to recovery, prolonging weak growth.

Source: Kenanga