KUALA LUMPUR (July 4): Morgan Stanley (MS) Research sees Malaysia’s near term economic growth as “healthy” and forecasts the country’s GDP to grow at 4.8% this year.

“MS economics team believes that GDP growth momentum in Malaysia will remain healthy in near term amid support from feel-good election measures,” said a global research report by MS today.

It said although Malaysia’s 1Q13 GDP grew 4.1%YoY, below consensus expectations of 5.5%, domestic demand remained strong at +8.7% YoY and MS team believes that underlying growth is still healthy.

Morgan Stanley forecasts Malaysian exports as rising 0.9% this year, and imports up 2.7%.

The ringgit is seen weakening to 3.25 to a US dollar this year and inflation is seen at 2.3%.

On the political front, MS said the next political event to watch for is the UMNO party election, which will determine leadership stability.

“Our economics team believes that Malaysia’s structural story has been less compelling compared to its ASEAN counterparts and PM Najib can continue on the reforms that he has embarked upon.

“The team believes that reforms related to quality of human capital are critical in terms of engineering a structural inflexion point in Malaysia.”

Globally, Morgan Stanley’s overweight-rated countries are: China, Peru, Hong Kong, Russia, Chile and Czech.

And its underweight-rated countries are: South Africa, Hungary, Philippines, Indonesia, Colombia and Mexico.