United Overseas Bank Group (UOB) expects Malaysia's gross domestic product (GDP) growth to strengthen in the second half
of the year, bringing the full-year rate to 4.7 per cent compared with 5.6 per cent in 2012.

Malaysia's economy grew 4.1 per cent in the first quarter of this year.

UOB head of research and investor relations, Jimmy Koh said growth would be driven by the recovery in external demand due to an improved global economic outlook with a better US economy and as Europe recovers from its financial crisis.

For 2014, he projected the Malaysian economy to expand by five per cent or more.

"With the conclusion of the general elections, the continued roll out of the Economic Transformation Programme, which includes developments in Iskandar region and Greater Kuala Lumpur/Klang Valley, will help boost foreign direct investment and sustain GDP growth," Koh said during a media briefing today.

He said UOB was also maintaining its forecast that Bank Negara would keep its benchmark overnight policy rate steady for the rest of the year, but there was greater prospects of tightening in the later part of next year as domestic demand retains its strength.

This, Koh said, was on expectations that the US Federal Reserve would only raise short-term interest rates in 2015 or end-2014 in view of the modest pace of the US economic recovery and until its unemployment rate improves significantly.

"This will give time for Asian central banks including Malaysia to adjust their monetary policies and for investors and businesses to manage potentially higher borrowing costs," he said.-- Bernama