KUALA LUMPUR, Malaysia --RHB Research Institute Sdn Bhd expects Malaysia's real gross domestic product (GDP) to grow at a more moderate, but healthy pace of 5.2 per cent in 2018, from the 5.6 per cent estimated for 2017.

In a statement, the research house said this was on the back of slower exports, due partly to a higher base in 2017, as well as a slowdown in public spending that was in line with the government's fiscal consolidation drive.

"However, the growth is likely to remain supported by resilient domestic demand, as exports would continue to expand and trickle down to consumer spending and private investments," it said.

Meanwhile, it expected private consumption to remain strong in 2018, mainly supported by employment gains and income, while private investments are expected to be lifted by implementations of mega infrastructure projects and investments in manufacturing and services.

On exports, the research house forecast it to continue to grow at a relatively healthy pace of 5.6 per cent in 2018, albeit slower from the 8.8 per cent increase estimated in 2017.

"This is on account of more moderate demand for electrical and electronics (E&E) shipments, as well as non-E&E and commodity export products," it said.

On the currency front, RHB Research expects the ringgit to trade at around RM3.95 against the US dollar at end-2018, from an estimated RM4.10 as at end-2017, driven by a surplus in the current account.

"The current account surplus in the balance of payments next year is to widen to 2.7 per cent of GDP versus a surplus of 2.5 per cent of the GDP estimated for 2017, due to a wider merchandise balance and smaller deficit in the transfers account.

The research house also opined that Bank Negara Malaysia (BNM) is likely to raise the overnight policy rate (OPR) by 25 basis points to 3.25 per cent in 2018, on account of an elevated inflation rate, while Malaysia's economic growth continued to sustain at a reasonably strong pace. (BNM is Malaysia's cental bank)

"Overall, we envisage the headline inflation rate to ease to 2.7 per cent in 2018, but stays elevated compared with the 3.8 per cent increase estimated for 2017," it said.