PETALING JAYA: The country’s economy is expected to recover gradually in the second half of 2016 as it begins to see the effects of mega infrastructure capital spending and the government’s growth stabilisation measures, according to United Overseas Bank (Malaysia) Bhd (UOB Malaysia).

Its economist Julia Goh said key stabilisation measures include a 3% cut in the Employees Provident Fund contribution rate, a special RM2,000 tax relief for middle-income tax payers, an increase in the minimum wage and civil servant wages, visa waiver for tourists from China, and a corporate tax cut.

“These measures could effectively boost nominal gross domestic product (GDP) by at least 1%. As such, we continue to project GDP growth of 4.2% this year, with an average of 4% growth in the first half of 2016 and 4.4% in the second half,” she said in a press release yesterday.

On the ringgit, Goh said the currency continues to show some volatility amid expectations of a US interest rate increase in the coming months.
However, she noted that the ringgit is still the second best performing currency in Asia after Japan’s yen.

“Our outlook for the ringgit remains positive driven by recovering oil prices, the country’s sustained current account surplus and intact fiscal deficit targets.”

Despite sustaining four quarters of slowing growth, she said, the Malaysian economy continues to display an underlying resilience, supported by its high labour force participation rate and positive employment growth.

In addition, Malaysia’s favourable demographics, growing working age population, positive nominal wage growth, accommodative monetary policies, and government support measures are contributing to its appeal.

Goh said Malaysia stands in good stead to achieve its objective of developed nation status by 2020 thanks to the initiatives under the National Transformation Programme, now at a significant mid-way point. However, maintaining such momentum will be challenging given the tougher operating environment both globally and within Malaysia, she added.