Thursday, August 19, 2010

Malaysia Economic Growth To Stay Strong

The Malaysian economy, which enjoyed a spectacular performance in the first three months of 2010, is expected to ease in the second quarter.

Economists polled by Business Times forecast the economy to grow 7.93 per cent year on year in the second quarter, from 10.1 per cent in the first.

They also project full-year growth to average 6.83 per cent before slipping to 5.47 per cent next year.

Bank Negara Malaysia will announce the latest data today.DBS Bank economist Irvin Seah said that although a moderation of gross domestic product (GDP) growth was expected - as the low base effect dissipates and external demand momentum slows - it would still be "a considerably strong pace of growth", with domestic demand as the key driver.

Private consumption growth may edge slightly higher to 5.3 per cent on the back of a brighter employment outlook.

Seah expects capital investment to bounce back after a sharp inventory destocking of about RM2.4 billion in the previous quarter."We could possibly see investment growth of about 7 per cent (from 5.4 per cent previously) as companies expand their production capacity along with this recovery," he said.

Seah, however, warned that strong domestic demand also implies that import growth will likely outpace the rise in exports and, thus, some drag can be expected from overall net exports.

US investment bank Citi attributed the slowing pace in the second quarter mainly to the services and agriculture sectors.

Within services, growth in electricity production, transport and storage, and tourism has moderated. The weakness in the rubber, crude palm oil and crude oil production sectors has dragged down agriculture and mining output.Economist Kit Wei Zhang said that financial services saw faster household and business loan growth during the second quarter.

Manufacturing growth edged up to 15.6 per cent as both export- and domestic-oriented industries recovered.

"But with production running ahead of exports in recent months, the resulting increase in inventories signals a likely moderation in manufacturing output in coming quarters," Kit said.

He said that construction has also picked up, led by projects under the stimulus packages announced by the government. There was also renewed pick-up in housing construction.

Kit said the narrowing of trade surplus may be partly offset by resilient domestic demand.

"Decline in sales tax has eased significantly, while consumption credit accelerated, although motor vehicle sales moderated slightly.

Economists polled expect GDP growth to ease in the second half of the year to about 5.08 per cent from an average of 9.07 per cent in the first half, due partially to weaker external demand.

Seah said that while manufacturing would once again lead the other key sectors in terms of growth, its pace was slowing.

With the uncertainties surrounding US recovery and the euro zone, and Asia facing slower growth, the pace of expansion in manufacturing would continue to moderate in the quarters ahead, he added.

Kit sees inflation at benign levels."With both output and inflation gap near neutral levels, a more subdued external outlook, and renewed easing by the (US) Federal Reserve (Fed), we maintain our view that Bank Negara Malaysia will stand pat till end-2010 and early 2011," he said.

Kenanga Investment Bank economist Wan Suhaimie Saidi said the slowing pace in the second half of the year was already evident as intra-regional trade showed signs of slowing on weaker export demand.

1 comment:

Chet Holmes said...

your article is very nice, i have found good information from this. Even i have found good information about Chet Holmes