Deutsche Bank: GST came at favourable time for Malaysia

by **Cals** Fri 17 Apr 2015, 00:14

Deutsche Bank: GST came at favourable time for Malaysia

By Shalini Kumar / theedgemarkets.com | April 16, 2015 : 6:39 PM MYT
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KUALA LUMPUR (Apr 16): The implementation of the Goods and Services Tax (GST) came at a favourable time for Malaysia, when inflation is likely to take off from a record low, according to Deutsche Bank.
In its Asia Economics Monthly report today, Deutsche Bank said inflation in Malaysia is likely to climb to about 1.5% in March, after authorities raised fuel prices by at least 12.5% from February.
"We also think that the GST should bring inflation to at least 2% from April through year-end. On average, this year’s inflation is likely to fall comfortably at the lower end of the 2%–3% expectation of Bank Negara Malaysia (BNM)," it said in its report, noting that the central bank was unlikely to hike rates.
Deutsche Bank also said introducing the GST this month would enable the government to meet its projected GST revenue of RM21.7 billion (from April to December) under the 2015 Budget.
"However, we note that more fiscal reforms are necessary to sustainably reduce the deficit. In our view, these reforms include hiking toll rates, rationalising natural gas subsidies, and augmenting GST revenues (by reducing the list of GST-exempt goods and services and raising the 6% rate)," it said.
Meanwhile, on exports, Deutsche Bank said declining export revenues and sluggish domestic demand due to the GST are likely to keep gross domestic product (GDP) growth below trend in the first half of this year.
"The second half may see a recovery but that would largely depend on some improvement in commodity prices and external demand," it said.
"This weak outlook on exports, coupled with fairly resilient demand for imports, weighs on Malaysia’s current account surplus," it added.
Deutsche Bank has a real GDP growth forecast for Malaysia of 4.5% for 2015.[/size]