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NEWS UPDATES 13 November 2009

Analysts predict Malaysia GDP to reach 3.2% in 2010

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Malaysia’s estimated gross domestic product (GDP) growth of 3.2 percent for 2010 by the government is achievable despite the potential double dip looming over a recovering global economy in the first half of next year, local business daily the StarBiz reported, citing comments by analysts.

The paper quoted Malaysian Rating Corp Bhd (MARC) chief economist Nor Zahidi Alias as saying that it was not possible to rule out the risk of a double-dip scenario in the global economy.

This was because it had happened in the United States in 1937 after its economy recovered from the Great Depression due to premature increase in interest rates, he said.

Nor Zahidi said such an incident would likely be repeated if the Government prematurely pulled the plug on stimulus measures, interest rates were bumped up quickly to hinder a perceived increase in inflation or the burst of another bubble in the properties and equities market.

“Bear in mind that property prices, particularly in countries like Hong Kong, China and even Australia, have increased strongly compared with a year ago,” he told StarBiz.

He noted that equity prices had gained 73% based on the MSCI World index while the MSCI Emerging Market Index had gained by an astounding 102 percent since March this year.

“Another concern is the possible relapse of the US economy as the effects of the stimulus packages wane next year and consumer spending starts to moderate,” he added.

In addition, the expiry of first-time home buyers’ tax credit in the United States will likely affect home purchases, going forward. “Hence, the 3.5 percent GDP growth posted by the US economy in the third quarter may not be repeated,” he said.

MARC has projected a 3.6 percent GDP growth for Malaysia in 2010 based on a possibility of some of the weaknesses in the US economy next year, which will affect Malaysia’s trade performance.

“The domestic economy, however, fuelled by the implementation of the stimulus packages, will be able to offset some of the weaknesses in the external sector,” Zahidi said.

Malaysian Institute of Economic Research (Mier) executive director Prof Datuk Dr Mohamed Ariff Abdul Kareem had reportedly said earlier that Malaysia might not be able to achieve the targeted 3.2 percent GDP growth.

This was because stimulus-driven growth globally was not sustainable and would lead to a bigger dip by the first half of next year, affecting the domestic economy, he said. Mier had forecast a 3.7 percent growth for 2010 on expectation of recovery in export destinations, barring the realisation of a double dip.


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