In its April 2019 update, the World Bank is maintaining its forecast for Malaysia's 2019 gross

domestic product (GDP) growth at 4.7%, with private consumption continuing to be the main
driver of growth, albeit expanding at a more measured pace.

"Household spending will be buoyed by stable labour market conditions and income support
measures such as the Cost of living Aid (Bantuan Sara Hidup). Gross fixed capital formation is
expected to increase slightly, driven by the private sector, while public investment is expected to
remain subdued in the near term.

"The external sector may be negatively affected by heightened uncertainty surrounding the
global environment, particularly the possible escalation of US-China trade tensions," it said in its
report today.

By 2020, the World Bank said Malaysia's economy is projected to expand at 4.6%, and the
country is expected to achieve high income country status by 2024.

The World Bank issued its April 2019 edition of East Asia and Pacific (EAP) Economic Update
today titled Managing Headwinds.

In the report, the World Bank foresees growth in developing EAP economies to soften to 6% in
2019 and 2020, down from 6.3% in 2018, largely reflecting global headwinds and a continued
gradual policy-guided slowdown in China.

"Still, the region's economies weathered the financial markets volatility of 2018 relatively well
largely due to effective policy frameworks and strong fundamentals, including diversified
economies, flexible exchange rates, and solid policy buffers," it noted.
While trade policy uncertainty has abated, the report said growth is likely to moderate further.

However, it added that domestic demand has remained strong in much of the region, partly
offsetting the impact of slowing exports.

On the outlook for Malaysia, the report noted that the fiscal deficit is expected to narrow to 3.4%
of GDP in 2019 and subsequently to 3% in 2020.

"Near-term fiscal consolidation efforts are expected to be achieved primarily through rigorous
expenditure rationalisation, with broad-based declines (in percentage of GDP) projected across
major components of operating and economic development outlays.

"Monetary poverty is expected to continue its downward trend in 2019, with a projected decline
to 1.4% based on the upper middle-income countries (UMIC) poverty line of US$5.5 (2011 PPP)
per person per day. Several initiatives for low-income households, including the national B40
Health Protection Fund, a B40 insurance scheme and affordable housing initiatives are in the
pipeline to improve both monetary and non-monetary wellbeing," it said.

In terms of risks and challenges, World Bank said the ongoing uncertainties surrounding the US-
China trade tensions and shifts in global financial market sentiment pose downside risks to
Malaysia's economy in the near term, due to the country's high degree of trade and financial
integration.

"On the domestic front, the relatively high levels of government liabilities and increased
dependency on oil-related proceeds could potentially constrain the flexibility of fiscal adjustment
against future macroeconomic shocks. In the private sector, the relatively high level of household
debt remains a source of macro-financial stability risk and acts as a constraint on household
spending," it said.

World Bank said the principal challenge to more rapid and inclusive economic growth lies in
increasing labour productivity, which in turn depends on stronger human capital development.

"Malaysia's score on the Human Capital Index (HCI) is 0.62, which is about as expected
compared to other UMICs but well below that of its aspirational comparators," it said.

"Malaysia performs well on the child survival and years of schooling components of the HCI but
does poorly relative to its economic peers in child nutrition and the quality of education. Key
priorities are thus enhancing learning outcomes, reducing child under-nutrition and strengthening
social protection systems to enable households to both invest in and protect human capital," it
suggested.

The World Bank also reduced it forecast for global economy growth to 2.7% in 2019, from 2.9%
projected earlier in January this year.

"Global conditions remain challenging in 2019. Global growth is projected to slow to 2.7% in
2019, reflecting decelerating activity in advanced economies and in many large emerging market
and developing economies. Global trade has weakened further amid slowing global investment
and manufacturing activity," it said.

"While trade policy uncertainty has abated somewhat, global trade growth is expected to
moderate further. As growth prospects have softened, the tightening pace of international
financing conditions has eased, providing some respite to countries with large external financing
need needs," it added.

Malaysia's consumer price increased 0.2 percent year-on-year in March 2019, rebounding from a
0.4 percent fall in the previous month but lower than an expected 0.3 percent rise. It was the first
increase in consumer prices since December last year, as food prices rose faster and housing
inflation was steady while transport prices fell less than a month earlier
Year-on-year, cost of food & non-alcoholic beverages went up faster (1.1 percent from 1 percent
in February). Among food, cost continued to rise for: food away from home (3.4 percent, the
same as in February); fish & seafood (0.1 percent, the same as in the prior month); milks & eggs
(2.0 percent vs 1.8 percent).
In addition, prices of furnishings, household equipment & routine maintenance went up 0.3
percent, accelerating from a 0.1 percent gain in February.

On the other hand, inflation was steady for housing, water, electricity, gas, & other fuels (at 2
percent); alcoholic beverages & tobacco (at 1.1 percent), and education (at 1.3 percent) while
cost rose softer for restaurants and hotels (1.0 percent vs 1.3 percent).
Meantime, transport prices dropped 3.0 percent in March, compared to a 6.8 percent fall in
February, following the government's recent decision to change its fuel subsidy model by setting
prices every week. At the same time, cost continued to decline for: miscellaneous goods &
services (-2.0 percent vs -2.2 percent in February); recreation services & culture (-0.4 percent,
the same as in February); communication (-1.1 vs -1.2 percent); clothing and footwear (-3.0
percent vs -3.2 percent); and health (-0.2 percent vs -0.4 percent).
Core consumer prices rose 0.5 percent year-on-year in March, faster than a 0.3 percent gain in
February. It was the seventh straight month of increase in core consumer prices and marking the
highest core inflation since November last year.