Malaysia
set for 4.6pc growth
MALAYSIA'S highly open economy is expected to see an uneven recovery
this year due to ongoing risks from the US and Europe.
Overall, gross domestic product (GDP) growth in Malaysia is likely to come at 4.6 per cent in 2012 and, assuming global recovery continues, 5.1 per cent in 2013.
The World Bank, in its latest outlook, said the disappointment and pessimism about global growth prospects had led to a mark down in growth forecasts this year even though data was mixed.
Frederico Gil Sander, the World Bank's senior country economist for Malaysia, said the speed bumps which slowed global recovery last year might be felt this year, too.
Overall, gross domestic product (GDP) growth in Malaysia is likely to come at 4.6 per cent in 2012 and, assuming global recovery continues, 5.1 per cent in 2013.
The World Bank, in its latest outlook, said the disappointment and pessimism about global growth prospects had led to a mark down in growth forecasts this year even though data was mixed.
Frederico Gil Sander, the World Bank's senior country economist for Malaysia, said the speed bumps which slowed global recovery last year might be felt this year, too.
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"But it
should not be any worse than last year," he said in an interview with
Business Times, referring to deterioration in global growth prospects.
The World Bank's outlook follows on the heels of the Asian Development Bank's latest outlook on Wednesday, which expects Malaysia to grow by four per cent before quickening to five per cent in 2013.
The new GDP growth forecasts are lower than the 4.9 per cent forecast in the previous edition of the Malaysia Economic Monitor mainly due to a revision of domestic demand in light of the somewhat stronger headwinds expected to affect the domestic economy especially consumption and higher base from the strong performance in 2011.
The Malaysian economy grew by 5.1 per cent last year underpinned by domestic demand.
Bangkok-based Sander said investment is likely to expand further but government consumption is bound to moderate, while inventories will be a drag.
"Domestic demand is expected to continue to support growth in 2012 and the outlook for fixed investment in particular is somewhat more favourable than in 2011."
But the contribution of domestic demand to growth is likely to be reduced as public consumption, while still set to remain robust in 2012, cannot be expected to continue growing at the 17 per cent pace of 2011.
Private consumption, according to the World Bank, also faces both headwinds and tailwinds. On the one hand, wages may increase with the introduction of the minimum wage, inflation is trending down, and government transfers are likely to support consumption. Stricter rules on credit and stable commodity prices and output especially in palm oil may dampen growth.
Domestic demand will also be affected by inventory accumulation, which is likely to contribute more negatively to growth in 2012 since the restocking cycle is poised to have been completed in 2011.
Export growth is assumed to pick up under a baseline of stronger global recovery in the second half of 2012.
Exports are expected to accelerate from 3.7 per cent to 6.6 per cent on a modest recovery in advanced economies coupled with solid growth in emerging Asia. This compares with pre-crisis export growth rates of 7.6 per cent.
Non-commodity exports should post some improvement from the near-zero growth rates of 2011, driven by demand from advanced economies towards the second half of the year, and continued growth in consumption in Asia from a low base.
In the case of electrical and electronics sector, Sander said although February data indicated an improvement, the picture was still mixed.
While further increases in oil prices are generally beneficial to Malaysia, they also pose challenges as well.
On the government's transformation programme, he said the challenge is to expedite the implementation of structural reforms which is key in transforming the economy into a high-income one.
Implementation can be assisted by increasing the coordination of related reform efforts such as safety nets and education, building capacity within the civil service to lead reforms, and working towards consensus in key areas such as educational reform, subsidy rationalisation and broadening the tax base.
The World Bank's outlook follows on the heels of the Asian Development Bank's latest outlook on Wednesday, which expects Malaysia to grow by four per cent before quickening to five per cent in 2013.
The new GDP growth forecasts are lower than the 4.9 per cent forecast in the previous edition of the Malaysia Economic Monitor mainly due to a revision of domestic demand in light of the somewhat stronger headwinds expected to affect the domestic economy especially consumption and higher base from the strong performance in 2011.
The Malaysian economy grew by 5.1 per cent last year underpinned by domestic demand.
Bangkok-based Sander said investment is likely to expand further but government consumption is bound to moderate, while inventories will be a drag.
"Domestic demand is expected to continue to support growth in 2012 and the outlook for fixed investment in particular is somewhat more favourable than in 2011."
But the contribution of domestic demand to growth is likely to be reduced as public consumption, while still set to remain robust in 2012, cannot be expected to continue growing at the 17 per cent pace of 2011.
Private consumption, according to the World Bank, also faces both headwinds and tailwinds. On the one hand, wages may increase with the introduction of the minimum wage, inflation is trending down, and government transfers are likely to support consumption. Stricter rules on credit and stable commodity prices and output especially in palm oil may dampen growth.
Domestic demand will also be affected by inventory accumulation, which is likely to contribute more negatively to growth in 2012 since the restocking cycle is poised to have been completed in 2011.
Export growth is assumed to pick up under a baseline of stronger global recovery in the second half of 2012.
Exports are expected to accelerate from 3.7 per cent to 6.6 per cent on a modest recovery in advanced economies coupled with solid growth in emerging Asia. This compares with pre-crisis export growth rates of 7.6 per cent.
Non-commodity exports should post some improvement from the near-zero growth rates of 2011, driven by demand from advanced economies towards the second half of the year, and continued growth in consumption in Asia from a low base.
In the case of electrical and electronics sector, Sander said although February data indicated an improvement, the picture was still mixed.
While further increases in oil prices are generally beneficial to Malaysia, they also pose challenges as well.
On the government's transformation programme, he said the challenge is to expedite the implementation of structural reforms which is key in transforming the economy into a high-income one.
Implementation can be assisted by increasing the coordination of related reform efforts such as safety nets and education, building capacity within the civil service to lead reforms, and working towards consensus in key areas such as educational reform, subsidy rationalisation and broadening the tax base.
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Source : New Straits Times
Date : 13 April
2012
afternoon
highlight (13/04/12/068/542)
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