'Respectable' Malaysia growth figure for 2008 likely

MALAYSIA'S economic growth will likely slow to 1.23 per cent year-on-year in the fourth quarter of 2008, the lowest since 2001, on lower production and exports.But Business Times' poll of economists predicts that full-year gross domestic product (GDP) growth will still increase by a "respectable" 4.96 per cent from 2007, supported by strong performance of trade during the first three quarters of the year.

Malaysia saw three consecutive quarters of slower GDP growth in 2008, from 7.4 per cent in the first quarter to 6.7 per cent and 4.7 per cent in the second and third quarters, respectively.

Economists polled expect the economy to grind to a halt this year, stagnating at 0.09 per cent on average. Bank Negara Malaysia will release the quarterly data today.
Standard Chartered Bank economist Alvin Liew said the negative expectations were set after exports contracted 7.4 per cent in the fourth quarter of last year.

"The gloomy external outlook may also have a dampening effect on domestic demand. Overall, we expect GDP growth to slow markedly to below 1 per cent in the fourth quarter of 2008," he said.

Citi said while year-on-year growth will remain positive, the implied quarter-on-quarter seasonally adjusted annualised rate (SAAR) will contract by 5.7 per cent, bringing Malaysia closer to the edge of technical recession.

"As the cushion from commodity prices evaporates, Malaysia's growth performance should converge with those of other regional technology exporters like Taiwan and Singapore, both of which saw GDP contractions of 8.4 per cent and 3.7 per cent respectively," said Kit Wei Zheng, Citi's vice-president of Asia-Pacific economics and market analysis.

He said the dip will largely be due to a sharp contraction in manufacturing output and exports, which fell 10.4 per cent and 7.4 per cent respectively in the fourth quarter.Citi said domestic demand is also slowing significantly, as seen by the recent falls in motor vehicle sales, dragged down by the spate of rising retrenchments in manufacturing.

GDP growth for 2009 will likely come in at a paltry figure in spite of a second budget stimulus, said DBS Bank economist Irvin Seah.Although the full-year 2008 growth will remain respectable, a more assertive and immediate set of policy responses is required to prevent the economy from slipping into a full-fledged recession given the dire economic outlook, he said.

TA Research economist Patricia Oh said the services sector will continue to be the main driver of growth in the fourth quarter of 2008, although posting a softening growth pace compared to the previous quarters.

"We expect the manufacturing sector to post the largest contraction among the other sub-divisions. There have been four consecutive months of contractions in the industrial output through December.

GDP growth is expected to moderate in 2008, underpinned by weak consumption spending, softening investment growth and huge contraction in external trade."As for 2009, we are likely to deal with drastic contraction within the exports and imports segments in real terms, and the overall external will still be able to register a healthy surplus," she said.