Twenty-Fifth National Economic Briefing

Is Economic Recovery Sustainable?

The global economy has recovered during the 1Q10, with developing Asia as the leading engine of growth. This was made possible through sustained domestic demand and improved global trade conditions. In tandem with regional economies, GDP growth strengthened further to +10.1% yoy in Malaysia. The recovery was led by strong revival in the manufacturing sector, especially export-oriented industries.

However, sentiments have turned sour recently. The sovereign debt crisis in Europe has led to doubt on the sustainability of global economic recovery. Furthermore, continued policies tightening measures by China have sent adverse shocks to economic agents worldwide. News flow from BP's accident in the Gulf of Mexico and Australia's proposed Henry Tax also heightened uncertainty among global investors. Other risks include possible implications from the US financial reforms and capital issues from the proposed Basel III banking sector regulations. Together these have negatively affected sentiments towards numerous sectors, particularly the exporters.

To confront these issues, measures were proposed under the 10th Malaysia Plan based on strategies articulated earlier in the Government Transformation Programme (GTP) and the New Economic Model (NEM) to sharpen the competitive edge of Malaysia. Five strategic thrusts were identified under NEM, namely: (a) Greater emphasis on non-physical infrastructure via human capital development in the public sector; (b) Generate higher income via new areas of growth and more participation by the private sector; (c) Encourage more socio-economic development; (d) Cultivate greater talent through education and more efficient labour market; and (e) Raise the quality of life via improved basic amenities, housing, and infrastructure.

These along with further liberalisation efforts on the services sector will attract more foreign participation in the long-run. In terms of addressing the burgeoning fiscal deficit problem, subsidies will be reduced progressively and the tax base widened over the next five-year period. The Government intends to lower budget deficit from 5.3% of GDP in 2010 to less than 3.0% in 2015, and to reduce debt-to-GDP ratio from 52.9% in 2010 to 49.9% in 2015. This will be achieved via a real GDP growth rate of 6.0% annually.

Against this background, MIER will be revising its 2010 GDP growth rate. This is also supported by firmer consumer and business confidence, as measured by MIER's Consumer Sentiment Index (CSI) and MIER's Business Conditions Index (BCI), respectively in 1Q10. All sectoral indices also recorded modest gains during the period.

In tandem with economic recovery and higher global commodity prices, overall consumer price inflation is expected to grow by +2.2% in 2010. Since core inflation has been rising faster than overall inflation, MIER anticipates the OPR to settle at 2.75% by end-2010. Firmer economic expansion will further lift the OPR to 3.25% in 2011.

The National Economic Briefing by MIER is a forum for discussing these and other issues of concern to the Malaysian economy. We will present the results of the 2Q10 business conditions and consumer sentiment surveys during the briefing. We will also be updating the four industry indices for the retail trade, residential property, tourism, and automotive sectors. Targeted at senior management and industry captains, this event encourages frank discussion with stimulating debates. Come join us and keep abreast with the latest happenings in the Malaysian economy. Attendance is limited and will be on a first-come-first-served basis.


PROGRAMME

Thursday, 15 July 2010, Parkroyal Hotel Kuala Lumpur
08.30 a.m.	Registration
09.00 a.m.	Opening Remarks Dr Zakariah Abdul Rashid Executive Director, MIER
	Address and Official Opening YB Senator Datuk Dr Awang Adek bin Hussin Deputy Minister of Finance Malaysia (to be confirmed)
9.30 a.m.	Refreshment
10.00 a.m.	National Economic Briefing Business Conditions, Consumer Sentiments and Malaysian Outlook Dr Zakariah Abdul Rashid, Executive Director, MIER Automotive Industry, Residential Property, Retail Trade and Tourism Market Perspectives Mr Quah Booh Huat, Research Fellow, MIER
12.00 noon	Q & A
1.00 p.m.	Lunch
Registration Fees:	RM400.00 per person for MIER Members RM500.00 per person for Others Members of the MIER Forecasting Club (one representative only) will be admitted free

Click here to download the 25th National Economic Briefing Registration form.

Posted by kala at 10:42 AM