Several Malaysian economists agreed that private investment has made a strong return, underpinned by improved investment climate and the various bold initiatives undertaken through the Economic Transformation Programme (ETP).
RAM Holdings Bhd group chief economist Yeah Kim Leng said GDP growth for 2013 will be about 5.3% while CIMB Group Holdings Bhd group chief economist Lee Heng Guie is predicting a growth of 5.5%, fuelled by robust private investment and domestic consumption.
Yeah said Malaysia has been able to withstand the global slowdown in demand for exports due to private consumption and investment that expanded by more than 20% in the first three quarters of last year.
He said among factors that assisted Malaysia’s economic growth last year, and would continue to do so this year, were low interest rates and firm asset prices.
Yeah said interest rates are expected to remain stable as inflationary pressure is expected to remain manageable.
On inflation, CIMB’s Lee said economic growth will likely put pressure on prices and see the inflation rate rise from 2.5% to 3% from the previous 1.7% to 2% last year.
Lee attributes the slightly higher inflation rate this year to the subsidy rationalisation programme and the spillover effects from the implementation of the minimum wage and global commodity prices.
Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said monetary policy is likely to remain unchanged unless growth momentum declines significantly.
He said Bank Negara Malaysia (BNM) is unwilling to endanger the financial system by inducing more over-leveraging practices through lower interest rates, especially among households.
Nor Zahidi said as household debt to GDP ratio has topped 60% in the past one decade, premature reductions in the policy rate will not be in line with the central bank’s intention to curb household appetite for debt.
On Malaysia’s current account, Yeah said while the current account surplus was 17% of the GDP between 2004 and 2008, it has declined to less than 10% in the last two years.
He said with 70% of imports being intermediate goods, it is unlikely that the current account would weaken when exports decline.
On the ringgit, Nor Zahidi said while he sees the general strengthening of the ringgit against the dollar, the short-term trend will be bumpy for several reasons. These include the weak prospects of the equity market among foreign investors with regards to the outcome of the general elections and the financial market’s perception that the ringgit may be adversely affected by the shrinking current account surplus.
“This would mean holding the ringgit would be more risky,” he said. Nor Zahidi said offsetting these factors are the prospects of a steady recovery of the US economy, which tends to weaken the greenback and thus be ringgit positive.
Sustained inflows of capital into Malaysia will benefit the region’s currencies and he expects the ringgit to move within the range of RM2.95 to RM3.15 against the dollar in 2013.
On some of the possible concerns of the Malaysian economy, Nor Zahidi said there are elevated levels of property prices and the overstretched household sector.
However, he said BNM should be given the credit for delicately balancing the need to contain household debt while avoiding a hard landing of the household sector. - FMT
GR kata: Bukti mana Anwar heboh Malaysia akan bankrap? Menipu rakyat jer kerjanya...Puiiiiittttt
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