The Malaysian Institute of Economic Research (Mier) estimates Malaysia’s gross domestic product growth for 2016 at 4.7%, compared to the estimated 4.9% growth for 2015.

Executive director Dr Zakariah Abdul Rashid said the country’s economy will continue to be domestically driven and remain fundamentally strong but stabilisation issues will need to be addressed.

Our economic condition is very much affected by short term stabilisation issues regarding confidence and sentiment in the economy, but the long term structure remains sustainable,” he told reporters at a briefing on Malaysia’s economic outlook for the fourth quarter of 2015 (Q4 2015).

The stabilisation issues include weakening domestic macroeconomic fundamentals like narrowing net current account surplus of the balance of payment, continuing net portfolio outflows, ringgit depreciation and tightening of domestic liquidity conditions, he said.

He said Malaysia grappled with severe headwinds on the economic front last year, following an unanticipated global commodity-currency shock, financial turbulence, weaker global trade and sudden reversal of capital flows.

Malaysian manufacturers were cautious on manufacturing activities with poor performance by most industries in Q4 2015 contributed by slow local orders and deterioration in external orders, and this is expected to continue in the first quarter of this year, said Zakariah.

Consumer confidence hit a new low in Q4 2015 with the consumer sentiment index at 63.8 points, down 19.2 points year-on-year, he said, adding households are even more negative in their financial and job outlook in 2016.

Moving forward, Malaysia must act fast to take appropriate actions to protect the presently vibrant economy and ensure the wellbeing of the people, and needs to be pro-active and forward-looking on external developments, Zakariah said.

Mier’s Malaysia growth projection for this year is based on the International Monetary Fund’s assumption of average crude oil prices at around US$47.97 a barrel and the ringgit assumption for exports at around RM4.20 to RM4.30 against the US dollar.

He said the ringgit has depreciated by almost 20% since 2013 while crude oil prices are hovering below US$30 a barrel, putting pressure on Malaysia’s economy.

“We urgently need to correct mistakes and misadventures on the domestic front and move forward with a clean slate, avoiding to a large extent political upheavals and shocks and applying prudent macroeconomic management in attaining fiscal sustainability and encouraging a greater role for private sector investment,” he added.