Positive growth seen for Malaysian economy

MALAYSIA'S economic growth this quarter and in the next will likely return to positive territory year-on-year, according to a research report by Deloitte.

And with the fiscal and monetary stimulus continuing and exports likely to recover, the recovery could be stronger than expected, said the firm in its "Asia Pacific Economic Outlook" released today.

The report on Malaysia said in the long term, the performance could depend on whether the economy is able to make the structural changes that look necessary.

"Malaysia, which has ambitions of becoming a high income nation by 2020, appears to be on the road to recovery," it said.



"Achieving the high income nation status is estimated to require a growth rate of 5.4 per cent, though estimates vary every year for the next decade," the report said.

"However, the economy is expected to shrink between two and three per cent this year and could show a growth of four per cent plus next year," it said.

Though the quarter-on-quarter growth has shown a sharp V-shaped recovery, the economy is still below the level it was at last year, the Deloitte report said.

"However, there are signs that the recovery could strengthen this quarter as in October, exports grew year-on-year for the first time in the past one year," it said.

"The 1.6 per cent gain came as most export markets improved, though most of the growth came from Asean countries and China."

The report said in the coming months, crude petroleum and liquefied natural gas could benefit from strengthening prices and palm oil tends to track the prices of crude petroleum.

"Demand for palm oil is expected to remain firm and rising prices will help generate higher revenues for exporters," it said.

According to the report, food prices rose in October and energy prices could begin to firm up as the global economy recovers, which could take the economy towards mild inflation next year.

"In the long term, however, the country economic performance could depend on whether the economy is able to make the structural changes that look necessary," it said.

"A key feature would be the ability to attract private foreign investment, especially in the services sector."

Some of the policy measures announced recently, such as the abolition of the rule to offer an equity stake to Bumiputeras in many sub-sectors, are designed to do precisely that, the report said.

"Malaysia is also looking to attract investments from China and Singapore, apart from strengthening its trading ties with these countries," it said.

Deloitte provides audit, tax, consulting and financial advisory services. - BERNAMA