PM: 6% growth target on track

Najib is confident that the global economic slowdown will not derail Malaysia's growth target.

PUTRAJAYA: Prime Minister Najib Tun Razak believes the global economic slowdown will not hamper Malaysia’s 6% growth target, saying efforts to rein in the budget deficit remains on track while inflation is manageable.

He said the slow growth of 4% in the second quarter, caused by weak economic data from rich economies, did not prompt a revision of Putrajaya’s 5% to 6% gross domestic product (GDP) forecast.

But Najib concurred with Bank Negara governor Zeti Akhtar Aziz’s views yesterday that Malaysia’s GDP is likely to be around 5% despite anticipating a possible stronger growth in the second half of the year.

“We have already said our estimate for this year is 5% to 6%. But we estimate it will likely be closer to 5%.

“The world economy is very volatile and uncertain so it is hard to fix a number for an estimate. We decide according to a range and the range is 5% to 6%, so we will retain this,” he told a brief press conference after chairing a National Finance Council meeting at the Finance Ministry here.

Slow growth could see the Najib administration’s aim to trim the government’s fiscal deficit hampered but the prime minister said the government remained on track with its target to reduce the fiscal deficit to 5.4% of the GDP this year.

Najib was forced to resort to unpopular measures such as slashing subsidies on basic goods to rein in escalating public debt which hit a 20-year high of 7% in 2009. The deficit was reduced to 5.6% last year.

“Deficit, so far so good. In a sense that our commitment to reduce deficit from 5.6% to 5.4% is on track,” he said.

Inflation in control

Meanwhile, Najib said the move to control prices of essential items during the festive season helped calm inflation.

“Inflation too is still manageable. Latest figures show a drop.

“Steps taken such as controlling and reducing the price of chicken have affected the inflation rate. We hope to record a low inflation rate while at the same time see a robust economy,” he added.

Yesterday, Bank Negara said Malaysia’s economic growth slowed down to 4%, the slowest since recovery efforts from the 2009 recession which Zeti attributed to a slowdown in exports and moderate government spending.

But the Central Bank governor remained optimistic, saying the nation’s economic fundamentals were still strong with a 5.2% growth in domestic consumption while unemployment remained low and loan defaults stood at only 2%.

Inflation remained relatively calm, said Zeti, hitting 3.4% in July and 3.3% for the first half of 2011.

Malaysia recorded a remarkable growth of 7.2% in 2010 as it rebounded from the global economic meltdown in 2009. But the spread of the euro zone debt crisis to Italy and Spain and frail economic recovery of the US had shaken growth prospects.