MIER expects 3.7% GDP growth in 2012

MIER expects 3.7% GDP growth in 2012

 http://www.theedgemalaysia.com/in-the-financial-daily/199737-mier-expects-37-gdp-growth-in-2012.html

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Written by Clint Loh

Friday, 20 January 2012 12:09

KUALA LUMPUR: The Malaysian Institute of Economic Research (MIER) said it expects Malaysia’s GDP growth for 2012 to “decelerate markedly” to 3.7% due to external factors. It said the country would need to reposition itself for uncertainties in the global economy. MIER’s GDP growth forecast of 3.7% in 2012 is substantially lower than the 5% to 6% projected by the government in October 2011. It is, however, still higher than Standard Chartered Bank’s bearish forecast of 2.7% announced last week. For 2011, MIER forecasts a GDP growth of 4.9% compared with the government’s projected 5% to 5.5% growth. “The situation in 2012 will not be better than 2011, and it may be worse,” said MIER executive director Dr Zakariah Abdul Rashid at the institute’s economic briefing yesterday. Zakariah said the country’s GDP will be affected by external factors, mainly the European debt crisis. “We need to be watchful of what is happening in Europe and reposition ourselves,” he said. Because of Malaysia’s size, Zakariah said the country needs to undertake structural adjustments in the short term and structural reforms in the long term. The country will then be more “vibrant and ready” for the uncertainties in the global economy, he added. Zakariah: We need to be watchful of what is happening in Europe and reposition ourselves. He said the US, a major destination for Malaysia’s manufactured exports, has been growing slowly and even if it improves, that would not guarantee higher demand for the country’s exports. Zakariah said industrial output could become more sluggish in the coming months as a result of the fallout from the eurozone crisis causing further decline in external demand. During his presentation, Zakariah said the industrial production index (IPI) grew by just 1.8% year-on-year (y-o-y) in November 2011 compared with 2.8% in October. In the same month, total trade grew 8.2 % y-o-y, but fell a significant by 8.1% month-on-month. Zakariah said the worsening manufacturing and consumer sentiments seen in MIER’s fourth quarter 2011 Business Conditions Index (BCI) and Consumer Sentiments Index (CSI) do not bode well for the economy in the coming months. The BCI, which tracks domestic manufacturing activity, dipped to 96.6 points in 4Q11, 7.9 points lower quarter-on-quarter (q-o-q) and 2.9 points lower y-o-y. Zakariah said the BCI falling below the 100-point threshold indicates that the sector is in a contraction mode. He said among the reasons for the decline in the index were lower foreign and domestic sales in manufactured goods, as well as lower capital investments and capacity utilisation in the manufacturing sector. “In the next three months [January to March], our survey respondents said they do not have bright expectations for new orders,” he said. The CSI, which measures expectations pertaining to finances in the coming months, employment prospects and current financial position, fell to a two-year low of 106.3 points in 4Q11, plummeting 2.4 points q-o-q and 10.9 points y-o-y. Zakariah said higher food prices and the looming general election may have caused consumers to be cautious in their spending, especially on big ticket items such as cars and houses. On domestic demand, Zakariah said private consumption, which makes up a major share in Malaysia’s GDP, is expected to moderate in 2012. In 3Q11, private consumption grew 7.3% compared with 6.4% in 2Q and 6.7% in 1Q. He said inflation moderated in November 2011 to 3.2% y-o-y, which indicated that inflationary pressures could ease on the expectation of slower global growth. This article appeared in The Edge Financial Daily, January 20, 2012.