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Wednesday, July 23, 2014

Mier sees 5.2% growth for 2nd half driven by domestic demand


KUALA LUMPUR: Malaysia’s economy is expected to remain relatively robust in the second half of this year, driven by domestic demand amid the strengthening external environment, says the Malaysian Institute of Economic Research (Mier).
The local think tank said it expected the country’s gross domestic product (GDP) in the last six months of 2014 to expand by 5.2%, which is slightly lower than the estimated pace of 5.4% in the first half of the year.
“Domestic demand remains the main driver for economic growth,” Mier executive director Zakariah Abdul Rashid said.
“External demand, although improving, cannot be relied on due to the fragile recovery of the global economy,” he said at a briefing on the Malaysian Economic Outlook yesterday.
Malaysia’s GDP expanded at a faster-than-expected pace of 6.2% in the first quarter, thanks to strong domestic demand and improvement in the external environment. The strong growth in the first quarter was also partly attributable to low-base effect.
For the full year, Mier said it expected Malaysia’s GDP growth to accelerate to 5.3%, compared with 4.7% in the preceding year.
Mier further projected the country’s GDP to expand between 5.5% and 6.0% in 2015.
Bank Negara’s estimates of Malaysia’s 2014 GDP growth stood at 4.5%-5.5%, while that of the Finance Ministry stood at 5%-5.5%.
“Growth will be moderately higher this year and the momentum is expected to continue into 2015,” Zakariah said.
Zakariah said although there were clear indicators that global growth was strengthening, it remained a “fragile recovery”.
According to the International Monetary Fund, the global economy is expected to grow 3.6% this year from 3% in 2013, before expanding further by 3.9% in 2015.
“The world GDP is expected to grow to 3.9% by next year following momentum gained in the second half of 2014, mainly due to recovery of advanced economies in the eurozone and an increasingly stronger growth in the United States,” Zakariah said.
He, however, cautioned on the new and emerging risks faced by the local economy.
These included risks arising from volatility of capital flows and deflation in key advanced economies, especially with inflation running below many central banks’ targets.
Zakariah said Bank Negara would likely keep the overnight policy rate (OPR) unchanged for the rest of the year, after raising it to 3.25% from 3% two weeks ago.
He added that policymakers would have to monitor the reaction of the market following the recent OPR hike.
Separately, Mier’s second quarter 2014 Consumer Sentiments Survey and Business Conditions Index show that the confidence levels of consumers and businesses have improved. Mier’s survey found the Consumer Sentiments Index rose 3.3 points to edge past the 100-point benchmark to settle at 100.1 in the period under review, while the Business Conditions Index rose 9.9 points to 113.

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