INSTITUT PENYELIDIKAN EKONOMI MALAYSIA (149064-U)

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MALAYSIAN ECONOMIC OUTLOOK


MEO 4Q 2011


Executive Summary




The IMF, in its September 2011 World Economic Outlook Report, lowered its forecast for 2012 global growth to 4 per cent, down from 5.1 per cent it had forecasted earlier. By early January 2012, its chief economist had announced that the IMF would on 24 or 25 January 2012 make a "fairly substantial" cut to its forecast for global economic growth this year.


The still unfolding euro zone debt crisis is at the centre of these downgrades. It is hurting the region's growth outlook and weighing on the exports of the European Union's key trading partners, which includes China. All this will weigh down on the near-term outlook of the Malaysian economy.

The Malaysian economy was resilient especially during the first three quarters of 2011, growing 5.1 per cent (1Q11: 5.2%, 2Q11: 4.3%, 3Q11: 5.8%). Growth in the last quarter of 2011 is expected to be much lower on account of external developments. Latest monthly economic indicators are already suggesting that.

The industrial production index grew just 1.8 per cent year-on-year in November 2011, compared to 2.8 per cent in the previous month. In the same month, Malaysia's total trade grew 8.2 per cent year-on-year but fell a significant 8.1 per cent month-on-month.

Inflation moderated slightly in November 2011 to 3.2 per cent year-on-year, an indication that inflationary pressures could cool going forward on account of expected slower global growth.

The results of MIER's fourth quarter Business Conditions Survey indicate declining manufacturing sector sentiments. The Business Conditions Index ended the fourth quarter below the 100-point threshold level at 96.6 points, 7.9 points below the previous quarter's level. Consumer sentiments too seem to have fallen, albeit slightly. MIER's fourth quarter Consumer Sentiments Survey results indicate a marginal worsening of sentiments. The Consumer Sentiments Index fell a marginal 2.4 points quarter-on-quarter to settle lower at 106.3 points.

The Retail Trade Index meanwhile went below the 100-point threshold to settle lower at 92.6 points. Both the Residential Property Index and the Automotive Industry Index also declined in the fourth quarter, the former settling lower at 120.1 points, the latter at 100.0 points. The Tourism Market Index however rose 10.8 points to settle higher at 126.0 points.

Given all of the above, we can only conclude that fourth quarter 2011 real GDP growth moderated both year-on-year and quarter-on-quarter and that economic growth will likely get bumpier in the months ahead.


Posted by suzy at 11:52 AM