FRIDAY, AUGUST 24, 2001
Malaysia escapes recession with 1.0% quarterly growth
KUALA LUMPUR: Malaysia narrowly escaped recession by posting growth of 1.0 percent in the three months to June over the first quarter, the central bank said on Thursday.
However, the government will again have to slash its full-year growth forecast for gross domestic product (GDP), the bank said.
GDP grew by just 0.5 percent year-on-year in the June quarter, hit by a sharper-than-expected 6.7 percent slump in manufacturing, said Bank Negara Malaysia governor Zeti Akhtar Aziz.
A June downturn would have put Malaysia in a technical recession -- two consecutive quarters of contraction -- after GDP contracted 3.9 percent quarter-on-quarter in January-March.
"While slower growth is a matter of some concern, it is important to recognise that Malaysia's underlying economic fundamentals remain on track for sustainable long-term growth," Zeti told a press conference.
But she said the government would cut its GDP growth forecast for the year for the second time when it submits the 2002 budget to parliament in October.
"Based on the performance of the first half this year and the global outlook... it is very likely that the third quarter will be similar to the second quarter," she said.
"It will be in the fourth quarter before we see a recovery. Based on this, there will be a revision of (the GDP forecast) for the year."
The government in March slashed its GDP growth forecast for this year to between five and six percent, from seven percent previously. Last year the economy grew by 8.5 percent.
Zeti said the government would work "towards achieving a positive GDP growth" this year by spending and investing more.
Economists said the figures were slightly above market expectations and attributed this to government spending.
"The main growth engine this time is government pump-priming. It's not all that cheerful because private consumption is still weak," said Nizam Idris, Singapore-based regional economist with IDEAglobal.
"This suggests that growth may not be sustainable because it's mainly down to government expenditure."
Nizam forecast Malaysia would post GDP growth of 0.5 percent over the year.
The central bank chief said manufacturing industry was adversely affected by the worse-than-expected global electronics downturn, but this was offset by growth in other industries. Manufacturing contracted 6.7 percent in the June quarter, with electronics output plunging 25.2 percent.
But services grew 6.1 percent and construction 3.2 percent as the government's expansionary policies began to filter through, the central bank governor said.
Agriculture was up 1.3 percent due to higher crude palm oil production and mining grew 0.7 percent amid higher natural gas output.
Zeti said Malaysia's main priority was to maintain low inflation and a strong external liquidity position.
Net inflow of foreign direct investment to Malaysia rose to 2.4 billion ringgit (632 million dollars) in the June quarter, up from 1.6 billion in the previous three months.
Public consumption rose 4.8 percent in the June quarter but private consumption expanded by just 1.6 percent from 4.1 percent in the first quarter.
Asked if Malaysia could slip into recession this year like neighbouring Singapore, Zeti said Malaysia had a more diversified economy and a larger domestic market to cushion it from overseas trouble.
Electronic products make up 55 percent of Singapore's manufacturing exports but 45 percent of Malaysia's, she said. Malaysia's services sector is also less reliant on the electronics industry.
Vickers Ballas economist Eddie Lee said: "The whole picture for Malaysia is that it came out better than its neighbours. The government is aggressive and more willing to pump prime." ( AFP ) Copyright © 2001 Times Internet Limited. All rights reserved.