OUT OF MONEY & FULL OF DEBTS, Malaysia on wrong side of economic slope, descent to quicken

Malaysia’s economic growth may be stunted next year due to a weaker global demand for Malaysian-made products, says a leading think tank.

The Malaysian Institute of Economic Research said the country’s economy was expected to grow at 5 to 5.5% next year, lower than the predicted 5.9%.

It said this was due to weaker demand for Malaysian exports next year. Weaker imports particularly on intermediate goods such as components will jeopardise future exports.

“As such the contribution of export demand to forecasted real gross domestic product (GDP) of between 5 to 5.5% in 2015 is predicted to be weaker,” it said in its "Malaysian Economic Outlook Report 2015-2014".

But, the report also included positive observations.

It said the economy grew beyond the initial expectation of 5.7% to 5.9% this year.

“This is strongly driven by the private sector, both in consumption and investment.”

Apart from weaker export demand next year, domestic demand is also expected to weaken and slow down overall growth.

“There is a strong indication that people are cautious on spending and will ease on savings on the fear of inflation,” the report said.

According to the 2013 Economic Transformation Plan report, private consumption now accounts for 51% of GDP.

There is an expectation that prices for consumer goods and services will increase next year as a result of the goods and services tax, further reduction in subsidies for fuel and an increase in wages as a result of the minimum wage policy.

At a press conference later, MIER executive director Prof Dr Zakariah Abdul Rashid said the economic forecast of between 5.5% and 6% for next year was on the low side.

“Going by the regional growth forecast by the Asian Development Bank, our growth rate could be stronger,” Zakariah said.

There was a similar trend this, he said, when the government had initially expected the economy to grow by about 5.7%.

“But yet the final rate is forecast at 5.9% due to stronger-than-expected growth in the first half of this year. So again we might grow more next year than we initially expect.” –TMI