ASEAN KEY DESTINATIONS
Malaysia: Slow growth may lead to rate cuts again
Malaysia's economic growth slid sharply in the third quarter to its slowest pace since mid-2005 as the global slowdown started to hit and the central bank said it was ready to cut rates again if needed, reported Reuters.
Annual gross domestic product growth slowed to 4.7 percent in the third quarter, data showed on Friday, down from 6.7 percent in the second quarter, and just above a 4.5 percent increase forecast in a Reuters poll.
Earlier this week, data showed growth cooling in the Philippines and Thailand, and the World Bank forecast a sharp slowdown in China next year, while Japan on Friday posted a larger-than-expected fall in industrial production.
Malaysia's central bank governor, Zeti Akhtar Aziz, said that interest rates, cut this week to 3.25 percent from 3.5 percent, were not restricting bank lending, though she said the central bank was ready to act again. This week's rate reduction was the first in 5 years.
"We have at our disposal further policies that can be implemented to contain the implications of a more adverse external environment on our domestic economy. We will monitor very closely the developments taking place," she told a press conference.
Zeti said that Malaysia would not slip into recession in 2009, although some economists think it will get close with investment bank UBS forecasting zero percent growth and RHB seeing just 1.5 percent growth.
"Moving forward, the full effects of the global downturn induced by the global crisis will only be felt in 2009. In fact, the economy could even surprise on the downturn next year," said Azrul Azwar Ahmad Tajudin, senior Economist at Bank Islam.
Most economists expect the central bank to cut rates by a total of 50 basis points by the first quarter of 2009.
The Malaysian government, which cut its growth forecast to 3.5 percent from 5.4 percent, has announced a $2 billion stimulus package to boost the domestic economy so as to offset weakening exports.