* 2017 growth seen at 4.3-4.8 pct, an improvement on 2016
* Exports seen expanding 5.5 pct y/y, from last year's 1.1
* Central bank signals no roll-back in steps to aid ringgit
By Joseph Sipalan and Praveen Menon
KUALA LUMPUR, March 23 Malaysia's central bank
said on Thursday it expects economic growth to pick up in 2017
for the first time in three years, but suggested it was in no
rush to roll back measures imposed last year to stabilise the
fragile ringgit currency.
Bank Negara Malaysia, in its annual report, projected the
economy to grow 4.3-4.8 percent this year, compared with last
year's 4.2 percent.
The target, if achieved, would end two years of slowing
growth and provide a boost for Prime Minister Najib Razak, who
has to face an election by mid-2018, and might call it in the
second half of this year.
"With the gradual improvement in global growth, recovery in
global commodity prices and the continued growth of domestic
demand are expected to collectively support Malaysia's growth
performance," BNM said, unveiling its 2017 forecasts.
The bank said domestic demand will continue to drive growth,
underpinned by private sector activity.
Headline inflation will be 3 to 4 percent, against 2.1
percent last year, BNM said.
Growth in Southeast Asia's third largest economy has
faltered in recent years, due to weak commodity prices as well
as tepid foreign investment, seen as a reaction to a financial
scandal involving state-owned 1Malaysia Development Berhad
But Malaysia, the world's second-largest exporter of
liquefied natural gas, is projected to see improved commodity
prices this year. Total exports are forecast to rise 5.5
percent, compared with 1.1 percent in 2016.
WHITHER THE RINGGIT?
The central bank also sees the fiscal deficit narrowing to
3.0 percent from 3.1 percent in 2016.
It said its 2017 commodity revenue projections were based on
a crude oil price of $50-$55 per barrel and palm oil at of 2,700
ringgit per tonne.
A big unknown for 2017 is movement of the ringgit,
which has been volatile, given expectations for at least three
interest rate hikes by the U.S. Federal Reserve.
Last year, the ringgit weakened 4.3 percent against the
dollar. The fluctuating currency prompted Malaysia's central
bank to introduce measures to stop offshore trading of it.
As a result, a flood of money left Malaysian bonds as
foreigners, who own $47 billion of them, were unable to hedge
their risks in onshore markets because of a lack of liquidity.
The ringgit hit a near 19-year low of 4.496 on Jan. 4,
though so far in 2017 it was strengthened 1.5 percent against
The Malaysian central bank "does not have a target for what
level it wants the ringgit currency to be at," Governor Muhammad
Ibrahim said on Thursday.
The ringgit is more stable following measures BNM introduced
in December, Muhammad said, adding that he expects to see more
dollars available in the domestic market in coming months in the
wake of those measures.
In December, BNM said exporters could only retain up to 25
percent of export proceeds in a foreign currency, while the
remainder must be converted into ringgit.
In the first two months of 2017, about $2 billion was
converted, Muhammad said.
He said the ringgit's volatility has lessened since the
The central bank is looking at measures to let smaller and
medium enterprises hedge their exposure to foreign exchange
volatility, he said.
BNM said it also looking at allowing businesses longer
periods for hedging to manage exposure to ringgit volatility and
manage rising cost of doing business, he said.
(Additional reporting by A.Ananthalakshmi; Editing by Richard