MALAYSIA'S GDP COULD GROW 3.5 PCT IN 2010, SAYS ECONOMIST

Bernama - Friday, May 29

KUALA LUMPUR, May 28 (Bernama) -- Malaysia's economy is expected to see a solid gross domestic product (GDP) growth of 3.5 percent in 2010, following a pick up in business activities in the second half of this year, says Allianz Group chief economist, Michael Heise.

Heise said business activity for the second half of this year would be driven by the stabilisation in world trade. For this year however, he said Malaysia's GDP is expected to decline by 2.5 percent, he told a media briefing here today. According to Heise, Malaysia's economic development is expected to remain soft in the second half of this year.

"Malaysia's economy has been hit relatively strong by the downturn in world trade, as the ratio of export to GDP exceeds 100 percent. In the course of 2008, economic expansion came to a halt following the financial crisis in US and other developed countries," he explained.
The financial crisis which has hit the Asian region, according to Heise is an event that will have significant impact for many years.

"Due to the widespread global financial crisis, wealth of individuals have been diminished," he said.

Asia, he said, has been hit particularly hard by the financial and economic crisis as booming exports had been the major driver of economic growth in recent years.

"For this year, we are forecasting fairly low growth of 2.7 percent for the Emerging Asian region (China, India, Indonesia, Malaysia, Singapore, South Korea and Thailand). In all probability, Asia will be spared a prolonged period in the doldrums," Heise said.

The second half of the year will herald economic recovery for the Asian region.

Apart from improvement in the global economic outlook, the main reason for a recovery in the Asian economy can be traced to the region's relatively robust banking system, large currency reserves and current account surpluses and low foreign debt, he said.

"For 2010, we are forecasting GDP growth of 5.6 percent for the Emerging Asian region. However, the momentum of economic growth for Asia and globally will not return to the previous boom level."

He also said that the Asian growth model is set to change. "Export momentum will be lower than before the crisis and trade surpluses will decline."

In order to achieve strong growth in the future, the Asian emerging markets, Heise said, are rightly attempting to bolster domestic demand in the medium term. -- BERNAMA