Thursday, February 25, 2010

Malaysia GDP In Positive Territory

PUTRAJAYA, Feb 24 — Datuk Seri Najib Razak announced today that the economy grew by 4.5 per cent for the fourth quarter of 2009, although GDP for the year still shrank slightly.

The prime minister said the positive growth in Q4 was helped largely by the government’s push to pump some RM1 billion a month into the economy.

This had resulted in the country’s economic performance faring better than expected.

Najib said that overall the country’s GDP for 2009 had still contracted by 1.7 per cent which was lower than the projected -3 per cent.

He set a target for his administration of growing the economy this year by five per cent which he said could be achieved barring unforeseen circumstances.

“Sustained growth in private consumption expenditure and increased public sector spending contributed to higher domestic demand, which recorded a growth of 3 per cent in the fourth quarter,” he said in explaining the economy’s better performance in the last three months of 2009.

Najib said that private consumption growth was supported by better conditions in the labour market, a low level of inflation and higher spending for the year-end school holiday period and festive season.

He added that an increase in public sector consumption also helped push growth into positive territory.

Public sector consumption expenditure expanded further by 1.3 per cent while public sector capital spending increased substantially as the implementation of projects under the quarter kicked in.

During the fourth quarter, the development expenditure of the federal government amounted to RM17.6 billion.

Najib said that this was an increase of 9.5 per cent compared with the fourth quarter of 2008.

The PM stressed that the implementation of the two stimulus packages were key to the economic recovery.

“Over 113,000 projects under the two stimulus packages have and are being implemented, involving a total value of RM17 billion. Out of that, the government has made a payment of RM13.9 billion. Therefore on average, the government has pumped approximately RM1 billion per month into the market from January 2009.

“As one of the specific measures in the mini budget 2009, the government has provided training and created employment opportunities to cushion the difficulties faced by retrenched workers and unemployed graduates,” he said.

The government has currently filled 38,495 of the 50,000 vacant posts in the federal civil service and recruited 11,131 officers on contract basis in government agencies since March 2009.

The government has also provided 100,000 training opportunities and job placements through its collaboration with the private sector.

Najib said he expected the private sector capital spending to increase this year.

“There are emerging signs of stabilization in the private sector capital spending as business sentiments continue to improve. This together with the higher public sector capital spending contributed to the turnaround in total gross fixed capital formation which registered a positive growth of 8.2 per cent during the quarter.

“On the supply side, all economic sectors recorded improved performance during the quarter. Growth in the services sector was broad based, with almost all sub-sectors recording higher growth rates. The manufacturing sector recovered to register a positive growth of 5.3 per cent, reflecting the improvement in both external and domestic demand.

“Activities in the construction sector expanded strongly by 9.2 per cent, benefiting primarily the accelerated implementation of projects under the fiscal stimulus packages and the ninth Malaysia plan,” he said.

The country’s export also recorded a positive growth of 5.1 per cent compared to -22.4 per cent in the third quarter.

Foreign direct investment also increased in 2009 to RM7.2 billion compared from RM6.7 billion with investments mainly in the manufacturing and services sector.

Najib said he was confident that the country would maintain its economic growth.

“For Malaysia the economy, yes (we can expect that the worse is over). Provided nothing seriously unexpected happens with respect to the global economy. For example any major sovereign collapse.

“Barring unforeseen circumstances of that nature, we could safely say that we have recovered from the crisis and we should be looking forward to a strong growth for 2010,” he said.
Najib said he expected the economy to grow by five per cent this year.

“As you know earlier forecast was four per cent but for this year, I am hoping that I can achieve one or two per cent more than that so we are going all out to make sure that we are able to generate the confidence and speedy implementation of projects.”

Friday, February 19, 2010

Economists Anticipate Economy Would Strengthen Further

THE last piece of economic data for a tumultuous 2009 was the industrial production index (IPI), which showed a strong bounce in the month of December.

The 8.9% improvement in industrial production in December from a year ago was only the second time industrial production for 2009 was in the black but the magnitude of the bounce and the similar pattern of factories roaring back to life in other countries have more or less affirmed opinion that the worst is behind us.

“Short term forward-looking indicators point to a sustained pickup in gross domestic product (GDP) and manufacturing activities in the first three to six months of 2010, as per the index of leading economic indicators and the global manufacturing Purchasing Managers’ Index, which chalked up its sixth consecutive month of expansion in January,” says Maybank Investment Bank in a note.

Industrial production data has a big influence on economic growth numbers given that the size of the manufacturing sector is still sizeable in Malaysia. Economists also point out that electricity consumption, which together with manufacturing and mining output make up the IPI, also gives some rough indication to the services sector activity in the country.

Manufacturing output, however, carries the heaviest weightage in the IPI. Industrial production was lifted by manufacturing activity, which posted a 12.9% growth in December from a year ago.
The electricity sector saw a growth of 14.1% but mining was down 0.2% as crude oil output fell.

“Real GDP should have rebounded year-on-year in the fourth quarter of 2009 as industrial production expanded 2.9% year-on-year – the first growth since the third quarter of 2008 – lifted by manufacturing and electricity production which gained 5.1% and 10.3% year-on-year respectively,” says Maybank.

“This supports the current view that the Malaysian economy has expanded year-on-year in the fourth quarter of 2009 after consecutive declines in the preceding three quarters and a flat fourth quarter of 2008. Our 2009 real GDP growth estimate of -2.2% versus -3.8% actual real GDP in Jan-Sept 2009 implies that the economy expanded by at least 2.5% year-on-year in the fourth quarter of 2009.”

OSK Research, in its note, says that although the IPI for 2009 was down 7.6% from a year ago, it sees the index rising by 9.4% for this year as the mining, electricity and manufacturing sectors continue to climb in the months ahead.

“Demand in the mining sector would continue to be boosted by higher commodity prices on the back of gradual economic growth. In view of growing domestic and global demand as well as better consumer sentiment, we see production levels in the manufacturing sector scaling up to meet increasing orders,” it says.

“Through higher levels of production from both the mining and manufacturing sectors, we believe the lengthening of operation hours may fuel demand for the electricity sector.

“Even if there is an electricity tariff hike in 2010, we believe the demand for electricity would be relatively unaffected as it is price inelastic as it is essential to the mining and manufacturing sectors.”

The rebound in the IPI and also stronger export numbers have economists predicting steady economic growth for 2010.

Exports have bounced back and in December, the value of goods from Malaysia was the highest in 2009 and growth of exports for the month was the strongest since July 2008.

AmResearch believes that economic growth rebound in the fourth quarter of the year could become much stronger than market consensus.

“Based on initial indicators of industrial sectors, which includes the manufacturing sector, we are now looking at a stronger growth of 2.5% to 3%, compared to a slower 1.5% growth predicted earlier,” it says in a note.

“This will push full-year contraction to a much slower -2.2% in 2009, before accelerating to 3.5% growth in 2010.”

While there is optimism for growth, some economist says greater scrutiny on the numbers are needed.

“We will know how sustainable the recovery trend is when we observe how the major indicators perform after the second quarter of 2010, as weakness in the major economies especially the US may yet weigh down on stronger growth,” says Kenanga Investment Bank in its note.

“The first half of 2010 may see stronger growth due to the base effect as well as further improvement in external demand and partly due to the residual impact from the stimulus package. However, the momentum may taper off in the second half of 2010 as those factors may start to loose its steam.”

It sees, along with ongoing domestic structural reforms, Malaysia’s economy likely perform below its potential. Kenanga expects the economy to grow by between 3% and 4% in 2010.

Wednesday, February 17, 2010

Feng Shui And What The Tiger Holds

It's a question we raise every year. Every Chinese New Year, in fact. And that's what the year has in store for us.

Never mind that some of us are not feng shui practitioners, but never a time had astrologers and feng shui masters had such allure than now when they would be consulted to predict whether we can finally wave goodbye to all the turmoils of last year and say hello to much better times ahead or we will continue to be doomed.

Indeed, if the turnout at local feng shui expert Joey Yap's Succeeding in Turbulent Times seminar in Kuala Lumpur last month were anything to go by, it reflected increasing interest among the locals in the ancient Chinese belief.

According to the Chinese calendar, 2010 is the year of the Metal Tiger. Many feng shui experts predict it to be a year of moderate growth, which makes sense as the world's economy is gradually recovering from the worst economic crisis in decades.

Favourable businesses to be in this year are said to be industries with the fire, earth and metal elements. These include stock market, energy, airline, construction, property, banking/financial and steel sectors.

On an individual basis, people born under the zodiac signs of the Monkey and the Tiger itself clash with the Grand Duke Jupiter star this year, so they must be careful because this year is considered not good for them. Just as important as what to do is what to avoid. They are warned against attending funerals and weddings in the next 12 months.

For those who are born in the year of the Pig, Snake, Rooster and Goat, 2010 is supposed to bring good luck, although there are conflicting views from feng shui experts with regard to those born in the year of the Dog and the Horse.

More often than not feng shui provides sensible advice and there is logic behind most feng shui situations. After all, the basic principle of feng shui is to create certain harmonious aspects between human, building and the environment surrounding it.

For example, a house facing the west is not good from a feng shui perspective. According to property agents, there is logical reasoning for this. For a west-facing house, you are constantly exposed to direct, hot sun in the afternoon that can heat the property to uncomfortable temperatures. To rectify the situation, simply plant shady trees so that you block the sun that beams into your house.

Similarly, every school of feng shui repeatedly warns against living in a house located at a T or Y junction. It's easy to see why. Such junctions are prone to road accidents. Pollution and dust are at their maximum at these junctions. You would also be disturbed by car headlights shining into the living room.

Rather than moving away, you can change the direction of the front door so that it doesn't face that junction anymore.

Still, while most Malaysians may consider feng shui superstitious, thousands of others swear by the results. I have a friend who claimed that the practice of feng shui has changed his business luck for the better and another who used it to counter office politics.

Never mind that some of us are not feng shui practitioners, but never a time had astrologers and feng shui masters had such allure than now when they would be consulted to predict whether we can finally wave goodbye to all the turmoils of last year and say hello to much better times ahead or we will continue to be doomed.

Indeed, if the turnout at local feng shui expert Joey Yap's Succeeding in Turbulent Times seminar in Kuala Lumpur last month were anything to go by, it reflected increasing interest among the locals in the ancient Chinese belief.

According to the Chinese calendar, 2010 is the year of the Metal Tiger. Many feng shui experts predict it to be a year of moderate growth, which makes sense as the world's economy is gradually recovering from the worst economic crisis in decades.

Favourable businesses to be in this year are said to be industries with the fire, earth and metal elements. These include stock market, energy, airline, construction, property, banking/financial and steel sectors.

On an individual basis, people born under the zodiac signs of the Monkey and the Tiger itself clash with the Grand Duke Jupiter star this year, so they must be careful because this year is considered not good for them. Just as important as what to do is what to avoid. They are warned against attending funerals and weddings in the next 12 months.

For those who are born in the year of the Pig, Snake, Rooster and Goat, 2010 is supposed to bring good luck, although there are conflicting views from feng shui experts with regard to those born in the year of the Dog and the Horse.

More often than not feng shui provides sensible advice and there is logic behind most feng shui situations. After all, the basic principle of feng shui is to create certain harmonious aspects between human, building and the environment surrounding it.

For example, a house facing the west is not good from a feng shui perspective. According to property agents, there is logical reasoning for this. For a west-facing house, you are constantly exposed to direct, hot sun in the afternoon that can heat the property to uncomfortable temperatures. To rectify the situation, simply plant shady trees so that you block the sun that beams into your house.

Similarly, every school of feng shui repeatedly warns against living in a house located at a T or Y junction. It's easy to see why. Such junctions are prone to road accidents. Pollution and dust are at their maximum at these junctions. You would also be disturbed by car headlights shining into the living room.

Rather than moving away, you can change the direction of the front door so that it doesn't face that junction anymore.

Still, while most Malaysians may consider feng shui superstitious, thousands of others swear by the results. I have a friend who claimed that the practice of feng shui has changed his business luck for the better and another who used it to counter office politics.

Monday, February 08, 2010

Robust Recovery, If US, China Rebound

MALAYSIA’S highly open economy, where total exports and imports account for more than 200% of gross domestic product (GDP), is expected to record a more robust recovery if growth in the world’s two largest economies continue to outperform.

The US economy recently announced a better-than-expected 5.7% growth in the fourth quarter of 2009 (2.2% in third quarter) as businesses reduced inventories less aggressively.

It was the quickest pace of growth in more than six years, beating market consensus of between 4.5% to 5%. For the full year, the US real GDP contracted by 2.4% in 2009, the first annual recession since 1991.

Meanwhile, China’s GDP is said to have grown 8.7% year-on-year in 2009 – the highest rate in the world. The country registered a 10.7% growth in the fourth quarter of 2009.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng says the US and Chinese markets account for more than a quarter of Malaysia’s exports, excluding intermediate exports to other countries that ultimately ends up in these two destinations.

“The fourth quarter growth in these two economies would also mean a greater absorption of a broader spectrum of Malaysian exports ranging from electronics as well as electrical products to resource-based exports such as rubber, petroleum, wood, chemical and palm oil products,” he notes.

Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias concurs that the country’s economic rebound would ride on the growth experienced by its major export markets like the US and China.

“Malaysia’s GDP growth is highly correlated with the US’ since the 1997 Asian Financial Crisis,” he says.

China’s strong rebound will also benefit Malaysia as its share of total exports have been steadily rising from 2% in 1999 to about 9% in 2008, he notes.

However, Zahidi adds that Malaysia’s economic rebound is also tied to the stimulus measures implemented by the Government.

“Consumer spending has strengthened, expanding by 1.5% in third quarter of 2009 after contracting by 0.7% in the first quarter, following an improvement in the Malaysian labour market,” Zahidi says.

However, the question remains if the recovery in the major global economies is likely to be sustained and how this would impact the Malaysian economy.

Although the US economy rebounded strongly in the fourth quarter, much of the growth was said to be driven by a rebound in inventory.

According to Zahidi, changes in inventory resulted in more than half of the growth (3.4% out of 5.7%). “Inventory correction, unfortunately, cannot sustain the US economy’s growth in the medium term,” he says, adding that real demand is needed.

However, private consumption remained lackluster in the fourth quarter, due to the high jobless rate and cautious lending by banks.

While the US official unemployment rate stood at 10% in December last year, the rate which includes discouraged and temporary workers stood at 17.3% in the same month.

At the same time, US banks were still very cautious in their lending to consumers, as seen by the 3.9% contraction in consumer credit in November last year.

Malaysia’s economic growth, Zahidi says, will largely depend on global conditions, adding that a sustained expansion in global growth and international trade will have a positive impact on the economy.

“If the global economy does not succumb to a double dip, then the prospects of achieving the Government’s targeted growth is bright,” he says, adding that domestic demand would also strengthen should consumer spending sustain throughout the year.

However, Zahidi says there are risk factors that could moderate the country’s growth.

“Malaysia’s household debt-to-GDP ratio stood at more than 60% in the past few years. A continued increase in credit-card transactions may lead us to question whether consumers are becoming more dependent on credit in supporting their consumption habit,” he points out.

Besides that, a correction in equity prices may also dampen consumer and business sentiments as well.

A recent report by the Malaysian Institute of Economic Research (Mier) says that although there are signs the global downturn has stabilised somewhat, overall recovery is expected to be sluggish and uneven.

“The recovery from the current crisis will be difficult compared to the previous ones because of the synchronised nature of the downturn.

“The technical recession is likely to end in the fourth quarter of 2009. However, Malaysia may not regain strength until the global economy is back on track, which is going to be at a disappointingly slow pace,” Mier says, adding that the services sector would be a pillar of strength amidst a glum manufacturing sector.