Domestic activities drive Malaysia growth

Despite a challenging environment, the Malaysian economy to grew
strongly by 5.8 per cent during the third quarter, powered by domestic activities.

Read more: Domestic activities drive Malaysia growth http://www.btimes.com.my/articles/20111119012043/Article/#ixzz1eHdtPfHw

Bank Negara Malaysia (BNM) governor Tan Sri Dr Zeti Akhtar Aziz said private and public sector spending, together with firm regional demand for Malaysian commodities and nonelectrical and electronic goods, contributed to the strong growth. She, however, warned that as a highly open economy, Malaysia is likely to feel the impact of the risks to the global economy in the fourth quarter. "We expect our domestic economy and demand to continue to sustain the growth," Zeti said at a media briefing on the country's economic growth here yesterday. The momentum of public investments, which were slow during the first half of the year, picked up in the third quarter. This will continue in the fourth quarter, while year-end bonuses will also have an impact on domestic spending. High commodity prices contributed to higher income of producers in the rural areas, which lent to higher spending. The Statistics Department yesterday also revised the growth numbers for the first and second quarters to 5.2 per cent and 4.3 per cent respectively. During the third quarter spanning July till September, domestic demand grew by 9 per cent, while most of the economic sectors improved except for mining, which has been contracting since the third quarter of 2010. Agriculture grew by 8.2 per cent, services (7 per cent), manufacturing (5.1 per cent) and construction (3 per cent), while mining contracted by 6.1 per cent. Credit Suisse economist Wu Kun Lung expects Malaysia's gross domestic product (GDP) growth performance to continue to outperform other small open economies in the next one to two quarters. While continued uncertainties in the euro zone are likely to weigh on Malaysia's exports, Wu expects private consumption growth to remain robust, partly thanks to high palm oil prices. "The impending fiscal boost from the government, in terms of rising development expenditure, cash transfers to the poor and civil servant pay rises should help boost domestic demand in the next few quarters," he said, adding that there is an upside risk to the gross domestic product forecast. On the outlook for 2011, Zeti warned that the external environment remains challenging. Close monitoring is required to gauge the impact on the economic growth and whether the domestic economy can offset the impact. "Given the recent developments in Europe, even if we have a growth rate of 4.8 or 5 per cent, this will be considered very good growth (in such a challenging environment)." The high degree of uncertainty is not positive for economic activities for their region but also other parts of the world, she added. Zeti also said that the Overnight Policy Rate, the key benchmark interest rate which has been kept unchanged at 3 per cent, is supportive of growth.