The Malaysian economy is clearly on track to achieve high income and advanced nation status by 2020. Real GDP grew 5.6% in 2012, surpassed consensus forecasts of a little over 5.0% and the Treasury's 2013 Budget forecast of between 4.5 - 5.0%. The 4Q 2012 growth at 6.4% year-on-year was the highest since 2Q 2010. The 2012 growth was driven by continuing strong domestic demand, with impressive annual growth in both private consumption and private and public investment outlays. Net exports of goods and services had meanwhile contracted by almost 30% due to the weaknesses in external demand conditions and generally lower global commodity prices.
There is still instability in the euro zone, dividing the Baltic sea countries and the Mediterranean countries with divergent trends in competitiveness. Greater role for ECB and better banking system, coupled with continued structural adjustment measures and labour market reforms are clearly needed to address issues like continued de-leveraging by banks, restrained credit conditions and high unemployment. Europe's current woes and stand-off over fiscal policy in the US affect world economic activity and recovery. Moreover, in developing Asia, China needs rebalancing, otherwise there will be continued slowdown in the developing Asia's largest economy.
The IMF, in its WEO Update in January 2013, projected world output to expand by 3.5% in 2013, a downward revision of 0.1 percentage point from the October 2012 WEO. It expects a mild growth in the US, continued slower growth in Japan and a slight improvement in the euro zone recession. Emerging and developing economies are expected to perform much better in 2013 with growth well above 5.0%.
Headline inflation was less than 2.0% in 2012, thanks to lower food and energy prices. However, Malaysia's headline inflation rate edged up slightly from the lowest of 1.2% registered in December 2012. Year-on-year, headline inflation grew 1.5% in February, 0.2 percentage point higher than 1.3% in January 2013. Bank Negara kept the Overnight Policy Rate (OPR) unchanged at 3.0% at its Monetary Policy Committee Meeting on 7 March 2013, representing a record 11th straight meeting since July 2011. The move is in line with the need to support growth in view of fragile and uneven global recovery and generally benign inflation.
The results of MIER's first quarter Consumer Sentiments Survey and Business Conditions Survey show that consumer and business confidence moved in opposite direction in the first quarter of 2013. While the first quarter 2013 Consumer Sentiments Index improved 4.2 points quarter-on-quarter to settle higher at 122.9 points, the Business Conditions Index continued its downtrend since the first quarter 2012 to settle lower at 92.6 points, indicating generally weak business confidence during the quarter.
Taking into account the gain in MIER's CSI, the performance of Malaysia's key macroeconomic indicators, continued implementation of ETP and 10MP projects and strong private investment, domestic demand is expected to continue driving growth of the Malaysian economy. We are maintaining our 2013 growth forecast of 5.6% for 2013. Growth outlook for 2014 is projected to be between 5.5 - 6.2%, on account of reduced global downside risks, especially with enhanced policy actions in the euro area and fiscal stimulus in Japan. There are also positive signs of economic growth in the US.
Posted by suzy at 03:04 PM