Economy to exceed 6% growth in 2010

Source: http://www.freemalaysiatoday.com/fmt-english/business/9385-economy-to-exceed-6-growth-in-2010


KUALA LUMPUR: Malaysia's gross domestic product (GDP) is expected to exceed 6.0% this year, according to Bank Negara Malaysia.

This is based on the strong growth figure recorded in the first half of this year despite the economic slowdown in advanced economies, Bank Negara governor Zeti Akhtar Aziz said.

Bank Negara has been monitoring the economic slowdown, she said, adding that it strongly believed that the Malaysian economy will continue to grow in the second half of this year.

The growth momentum in the first half of 2010 rebounded to 9.5% from a negative 5.1% in the same period of 2009, Zeti said.

"Based on the strong growth that we have experienced in the first half of this year, we believe the economy will continue to grow in the second half despite the challenging environment where we could see further slowing down in advanced economies, who are our trading partners," she told reporters after announcing the GDP growth for the second quarter of this year here today.

Asked whether this is a new forecast by the central bank, Zeti said: "There is no forecast, just saying that this is the expected number based on what we have seen so far."

"We don't expect a recession in advanced economies but the pace of growth has slowed," she said, adding that there is increased risk of a moderation in the global growth momentum moving forward following rising concerns over the ongoing sovereign debt crisis and the planned fiscal consolidation in several advanced economies.

The forecast growth will be announced during the 2011 Budget in October, she added.

Bank Negara has earlier forecast that the GDP for 2010 will be expanded between 4.5% and 5.5%.

Fundamentally strong

Zeti said going forward, the domestic demand, which is playing an important role in the Malaysian economy at present, is expected to remain strong, sustained by robust private sector demand.

The Malaysian economy, she said, is fundamentally strong, supported by strong financial system, ample liquidity and easy access to financing.

On foreign direct investment (FDI), Zeti said: "We expect that there would continue to be a steady inflow of FDI."

"This is further reinforced by the government's effort to improve business processes for companies to come to Malaysia," she said, adding that intra-Asean trade has improved.

Asked whether the central bank will increase or pause interest rate hike, Zeti said the current interest rate level of 2.75% is considered appropriate and consistent with the assessment of growth and inflation.

"Our monetary policy is forward-looking. It is not based on the current conditions but based on the outlook. Based on outlook for inflation and growth, the current level of interest rate is consistent and appropriate," she said.

For the ringgit, Zeti said Bank Negara does not have any target levels and what it wanted to see is orderly adjustments and movement of the currency.

"We saw that in 2009 the ringgit had appreciated the least and it so happens that this year, it has appreciated more. So, if compared within the two-year period, it is moderate, not deviating significantly from trends that occur in Asian region," she said.

Zeti said that Bank Negara was pleased that the market has remained orderly with trade activities increasing significantly.

"To exporters, their competitiveness has never really relied on the exchange rate. Malaysia has been able to enhance this through efficiency, quality and innovation," she said.

- Bernama