Monday, April 26, 2010

Malaysia To Grow At Fastest Pace Since 1996

The Malaysian economy is expected to expand at 8.0 per cent in 2010, buoyed by strengthening domestic and external conditions, AmResearch Sdn Bhd said.

"We are now projecting a much higher forecast of 8.0 per cent this year, the strongest since 1996, even though fiscal and monetary stimulus would be gradually withdrawn by year-end," it said in a statement today.

The AmResearch number is higher than Bank Negara Malaysia's gross domestic product (GDP) data forecast of 4.5-5.5 per cent and the World Bank's at 5.7 per cent.

Prime Minister Datuk Seri Najib Tun Razak has also a more optimistic forecast, of not less than 6.0 per cent for this year.

"It will be a broad-based recovery, with all major sectors of the economy registering positive growth, amid strengthening domestic demand and a pick-up in external demand," the research company highlighted.

For the first quarter of 2010, AmResearch estimates the economy to expand at a more rapid pace of 9.8 per cent, the highest in the last 10 years, with private sector spending by households as well as exports leading the way.

The country's export performance has benefited from an improvement in external demand, particularly from regional economies and stronger commodity prices.

However, with prospects of a disappointing global upswing getting dimmer, AmResearch maintains its forecast of the real GDP at around 6.0 per cent in 2011.

It said this would depend very much on the type of reforms in the pipeline, as well as the government''s commitment in making it a reality.

Since last year, several liberalisation measures have been introduced to lift direct foreign investment in financial services and in other tertiary sectors.

A new initiative known as the Government Transformation Programme (GTP) has also been started to tackle waste and corruption in the public sector and speed up the implementation of new projects.

Malaysia will also kick-start a second and final part of the New Economic Policy by the third quarter of this year, detailing structural reforms with timeliness, and this should boost the country's potential even stronger.

AmResearch said the major growth drivers in 2010 will be the manufacturing sector that is expected to expand by 12.3 per cent, led by the electric and electronic sector, which represents more that nine per cent of the GDP.

The services sector, it noted, is also estimated to grow at 7.1 per cent and contribute at least 4.1 percentage points to the GDP, led by stronger demand arising from a positive wealth effect of the financial markets, stable employment conditions and rising income levels.

AmReseach said private consumption is also expected to rise on the back of improvements in the labour market, disposable incomes and consumer confidence."We forecast a 4.5 per cent growth this year, against 0.8 per cent in 2009," it added.

Meanwhile, exports and imports are to post double-digit growths of 15 per cent and 16 per cent this year for a higher current account surplus of RM125bil or 20 per cent of the GDP.

Headline inflation is expected to rise 2.5 per cent, in tandem with improving economic conditions and possible adjustments to prices.

"Given the assumption of stronger economic momentum and higher inflation rates, we reckon the year-end target for the overnight policy rate will be at three per cent now.

"This is still below neutral levels and would not choke the recovery process."In this regard, we see the ringgit at RM3.10 per US dollar by year-end, moving towards its new fair-value, since the trade-weighted index is also a function of GDP and OPR," it added. -- BERNAMA

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