Malaysia not heading for recession, says Bank Negara

Things may not look so bright on the economic front but the central bank believes Malaysia can overcome challenges.

KUALA LUMPUR: The economic crystal ball for Malaysia this year may look murky but the country is confident of overcoming challenges, Bank Negara Malaysia (BNM) assistant governor Dr Sukhdave Singh said.

“Overall, the world had a very good bounce back from a difficult year in 2010. You will hear that we are heading for recession, this isn’t true. This year will bring more sustainable numbers for the global economy,” he said.

“All major economies will have positive growth this year,” he said at a seminar on “BNM Governor’s Address on The Malaysian Economy”.

He added that BNM would pay careful attention to relevant policies to help manage inflation.

The forum was organised by the Malaysian Economic Association and more than 50 organisations and three embassies attended it.

Sukhdave also said that the Malaysian economy was projected to grow 5% to 6% in 2011, but with a slower growth in the first half of 2011 in the face of lower demand for electronic products.

“Growth will pick up the second half due to higher exports,” he said.

Malaysia is also expected to see strong growth in domestic demand – driven by private sector activity, robust expansion in private consumption, favourable labour market conditions and rising disposable incomes.

“There will also be sound performance in private investment with increased capital spending in all economic sectors,” Sukhdave said.

Domestic demand

On Wednesday, BNM governor Zeti Akhtar Aziz said the inflation forecast at 2.5% to 3.5% in 2011 was still manageable.

Sukhdave said that BNM would ensure that domestic demand in Malaysia would not add to the existing inflation from abroad.

He added that BNM would also ensure that the impact of inflation on the lower and middle income groups is mitigated.

He also said that “for 2011, global growth is going to be increasingly dependent on emerging economies and markets.

“Advanced economies still need to address structural problems such as high unemployment rate, high fiscal deficit, and restrained credit conditions.”

On the recent natural disaster in Japan, Sukhdave said: “We are in no position to say how much that has happened in Japan will affect the (Malaysian) economy.”

However, Jason Chong, Manulife Asset Management CEO, is optimistic, saying that “while the risk is negative, Malaysia could benefit from the reconstruction of affected areas since timber and other manufacturing items will be required”.

In 2009, Japan remained Malaysia’s fourth largest global trading partner, fourth largest export destination and second largest import source.

In 2010, Malaysia’s bilateral trade with Japan amounted to RM130 billion. Japan has also been among the top three investors for Malaysia since 2006.

Readers can find more details on the BNM 2010 report in these links:

The 2010 Bank Negara Malaysia Annual Report

The 2010 Financial Stability and Payment Systems Report - FMT