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Research firms: M’sian economy to expand up to 5% this year

August 16, 2012

KUALA LUMPUR: The Malaysian economy is expected to expand up to 5% this year, after recording an impressive 5.4% growth in the second quarter of 2012, say research firms.

The 5.4% growth driven by stronger domestic demand, was an increase from 4.3% in the same quarter of last year.

AmResearch said it anticipates Malaysia’s gross domestic product (GDP) for 2012 to register between 4.5% and 5%, breaking its previous estimate of 4.5% year-on-year.

“We continue to believe that strong levels of domestic demand will remain apparent in the following quarters, especially on the back of the upcoming festive periods, coupled with the recently announced stimulus for the public sector as well as falling levels of inflation.

“This could potentially lead to growth reaching towards the upper end of the forecast range,” the research house said in a note today.

However, it said heightened levels of uncertainties as well as a slowing global economy remain as the major downside risks to growth this year.

“As such, a slowdown in net exports and other trade-related sectors remain on the cards given the declining numbers seen on the external front.

“Nevertheless, in the event of an unexpected severe shortfall from the external sectors, we remain confident that Malaysia will have the capacity to ensure strong levels of growth through fiscal and monetary measures still available,” it added.

In a separate note, Hong Leong Investment Bank (HLIB) Research has raised its 2012 full year GDP forecast to 5% from an initial target of 4.5%, on the back of softer manufacturing cushioned by bunching of construction projects and resilient private consumption.

For the second-half year, the research house said it expects the GDP growth for the third quarter to dip to 4.5%, dragged by subdued trade and manufacturing as well as higher base in the third quarter of 2011.

“That is before improving to about 5.1% year-on-year growth in the fourth quarter this year, mainly due to improving agriculture and mining. This will yield an average of 4.8% growth,” HLIB Research said.

On the demand side, it expects private consumption growth to taper off from the second quarter given the diminishing effect from one-off payments.

Sustainability of consumer spending, going forward, is challenging as strong growth in the second quarter has resulted in higher household debt (75.7% of the GDP and as at end-2011: 74%).

“We are still positive that the line-up of Economic Transformation Programme (ETP) projects for the second half of 2012 and 2013 could still provide a strong support to GDP growth despite external uncertainty,” HLIB Research said.

Both AmResearch and HLIB Research have maintained the view that Bank Negara Malaysia will hold the Overnight Policy Rate (OPR) steady at 3.0% until the end of 2012.

Bank Negara governor Zeti Akhtar Aziz yesterday said the Malaysian economy expanded by 5.4% in the second quarter of the year compared with 4.3% in the same quarter last year driven by stronger domestic demand.

During the quarter, domestic demand surged 13.8% against 9.7% in the first quarter.
Zeti also announced a revised 4.9% GDP growth for the first quarter from 4.7%.

She said stronger domestic demand was supported by robust growth in the expenditure of both the private and public sectors, while net exports moderated further due to weaker exports and higher imports.



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