Monday, November 18, 2013

Economy On Track To Hit Growth Target

KUALA LUMPUR: The economy chalked up stronger growth of five per cent in the third quarter of 2013, beating market expectations and the Business Times poll.

This places Malaysia well on track to achieve its 4.5 to five per cent growth projection for the whole year.

Exports turned around after seven quarters of contraction, rising by 1.7 per cent.

Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz, in releasing the data, here, yesterday, said the economy will remain on its steady growth trajectory as the external sector recovers gradually apart from domestic demand.

However, Zeti cautioned that international financial markets still face volatility amid uncertainties over the fiscal and monetary policies of the advanced economies, particularly the United States, which may have some impact on Asia.

The gross domestic product (GDP) data in the third quarter pointed to a stronger second half, she said.

Zeti also announced that the second-quarter GDP growth had been revised upwards to 4.4 per cent from 4.3 per cent originally.

Meanwhile, commenting on the strong economic data, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said Malaysia's foreign direct investments (FDIs) are set to surpass last year's number to buck the regional trend.

Net FDIs for the first nine months are already higher at more than RM27 billion from RM25 billion in the same period last year.

"Looking at this trend, Malaysia's FDI for this year is set to surpass last year's RM31.1 billion," Mustapa told reporters, here, yesterday after visiting the Kuala Lumpur International Motor Show 2013.

He said according to the Malaysia Investment Development Authority, most of the FDIs are from the manufacturing sector led by the United States, and followed by Singapore.

Zeti said during the period spanning July, August and September, all the sectors expanded, with the support of the domestic demand and improvement in trade activity.

The services and manufacturing sectors expanded further, while the agriculture sector showed higher growth along with the construction sector, mainly driven by the residential sub-sector.

Bank of America Merrill Lynch has revised its GDP growth forecast to 4.6 and five per cent for 2013 and 2014, respectively.

"An export recovery is buoying economic growth, while domestic demand remains resilient," said economist Dr Chua Hak Bin.

A firmer recovery in advanced economies and external demand next year will translate into stronger export performance and also benefit trade-related sectors, he added. 

Zeti said private investment also surged during the quarter, led by capital expenditure in the services and manufacturing sectors and the ongoing projects in the oil and gas sector.

This was in contrast with the public investment growth, which showed a weak improvement of 1.3 per cent. 

On the current account surplus, she said it had widened to RM9.8 billion from RM2.6 billion in the second quarter, while the overall balance of payments showed a higher surplus of RM11.8 billion during the quarter.

Chua said the export recovery has quelled fears of the current account slipping into a deficit.

"Export commodity prices are ticking back up, indicating improving terms of trade, and palm oil prices are up about 21.6 per cent from lows," he added.

On the impact of further subsidy rationalisation efforts and tariff rate hikes, Zeti said the price adjustments are done gradually to enable households and the private sector to adjust accordingly through energy-saving initiatives and spending behaviour.