Thursday, February 21, 2013

Robust Growth For Malaysia

RESILIENT: Economists cite Malaysian government handouts and supportive monetary conditions.

MALAYSIA is likely to record a robust growth in the fourth quarter of 2012, reflecting its resilience amid the challenging global conditions.

Bank Negara Malaysia will release details of the economic performance in the last three months of the year later today.

According to a Business Times poll, the fourth quarter will likely clock an average 5.02 per cent, drawing a similar average for the annual growth in 2012.

Bank of America Merrill Lynch expects a robust fourth quarter, supported by government handouts and supportive monetary conditions.

"Growth will be led by strong investment growth, spurred by infrastructure projects, and healthy consumer spending," said its Asean economist Dr Chua Hak Bin.

Against a global economy still fraught with uncertainties and unsteady growth levels, economists polled across Malaysia and Singapore, however, share a softer outlook for the Malaysian economy for 2013, with expectations of a 4.83 per cent average growth.

Credit Suisse has revised its growth outlook for 2012 and 2013, saying the revision reflects stronger than expected fourth quarter industrial production and an improved export outlook, which is partly due to Japan's reflation policies.

The industrial sector carries significant weight in the overall gross domestic product (GDP) in Malaysia at 39 per cent and this will give a strong lift to the fourth quarter.

"With the better GDP growth outlook, we think Malaysia will be among the first central banks in Asia (after Indonesia) to shift towards a more hawkish bias, perhaps after the general election, in the second half of the year," said its economist Santitarn Sathirathai.

Alliance Research remains cautious of a sustainable trend in the short-term, saying a major worry is the easing demand for commodities, including crude palm oil and rubber.

The fourth quarter GDP may have remained steady despite strong headwinds externally, hence a softening from the 5.2 per cent growth in the third quarter.

As for 2013, it expects GDP growth to be driven by sustained strong domestic demand activities, led by the implementation of the Economic Transformation Programme projects.

OCBC Bank is also forecasting the strong momentum in investment growth to continue into 2013, especially in the first half of the year, with the recent announcement of a further RM6.7 billion worth of projects approved between September and November last year.

The bank, however, has a more conservative outlook for 2013, saying it does not anticipate another 20 per cent investment growth.

Gundy Cahyadi said the ongoing risks stem from the lacklustre global demand and uncertainties linked to the upcoming general election.

"We expect to see fewer EntryPoint Projects announced in the first half, given the frontloading in 2011-2012 as well as the possibility that a large part of investors would want to hold back on their new investments to after the general election.

"This would presumably weigh on sentiment among business owners, exacerbating the already gloomy sentiment that was dominant in third quarter."

With the manufacturing sector already running at about 80 per cent to 82 per cent capacity utilisation rate, there is limited room for production growth in the short-term.

"As such, it would be crucial to monitor the trend in imports of capital goods going forward, as only a sharp increase in new investment could lead to a higher capacity in the near-term."

Cahyadi expects investment growth to moderate to seven per cent to 10 per cent year-on-year in 2013, taking into account the high base effects.


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