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BNM Annual Report: Economy to grow 5pct to 6pct in 2011 [24-03-2011]  
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Bank Negara Malaysia forecasts the economy to grow 5% to 6% in 2011, supported mainly by continued expansion in domestic demand with growth expected to pick up in the second half.

In its report issued on Wednesday, March 23 it said all economic sectors are projected to expand firmly in 2011, supported mainly by the continued growth of domestic demand.

“The growth projection of 5% to 6% is based on the expectation of moderate growth in the advanced economies and a return to more normal growth rates by the Asian economies,” it said.

Real GDP at 2000 prices 2010 2011
72.% 5%-6%
Agriculture 1.7% 3.4%
Mining 0.2% 2.0%
Manufacturing 11.4% 5.7%
Construction 5.2% 5.4%
Services 6.8% 5.9%
Nominal GNI 11.4% 8.8%
(RM bln) 740.7 806.1
Real GNI 4.2% 5.6%
(RM bln) 517.2 546.0


BNM said the services and manufacturing sectors are expected to expand, albeit at a more moderate pace given the high statistical base of 2010.

The central bank said the services sector will remain the largest contributor to growth, driven by the domestic demand oriented sub-sectors, particularly wholesale and retail trade, finance and insurance, and communication.

The trade- and manufacturing related sub-sectors, however, are expected to grow at a more moderate pace, in line with the expected moderation in external demand.

A similar moderation in growth is also anticipated for the export-oriented industries in the manufacturing sector. In particular, the E&E cluster will experience a slower growth following the strong rebound in 2010.

BNM said headline inflation is expected to average 2.5%-3.5% in 2011, and will continue to be driven by supply factors.

Domestic demand is projected to register a strong expansion of 6.7% in 2011, driven by robust private sector activity.

Private consumption will be the main contributor to domestic demand growth in 2011, with an expansion of 6.9%. The strong expansion in consumer spending is attributable to the favourable labour market conditions, higher disposable income and sustained consumer confidence.

The unemployment rate is projected to remain stable at 3.2% of the labour force in 2011.

Private investment is expected to register a growth of 9.7% in 2011, supported by capital spending in all economic sectors, particularly in the services, manufacturing and mining sectors.

Public investment is expected to remain supportive of growth in 2011 with an expansion of 2.7%. This is on account of higher Government capital spending driven by new projects planned under the ETP and 10MP as well as ongoing 9MP programmes.

The services sector will remain the largest contributor to growth in 2011, with a projected growth rate of 5.9% (2010: 6.8%).

The manufacturing sector is projected to grow at a more modest pace in 2011 given the high base in 2010. Slower expansion is expected in the export-oriented industries, in tandem with an environment of more moderate external demand.

The agriculture sector is expected to record a higher growth of 3.4% in 2011 due to a turnaround in the production of industrial crops.

The mining sector is projected to expand by 2% reflecting higher natural gas output with the opening of two new gas fields in offshore Terengganu and Sarawak.

Growth in the construction sector is expected to improve to 5.4% in 2011 (2010: 5.2%), supported by expansion across all sub-sectors.

Headline inflation is expected to average 2.5% to 3.5% in 2011. Inflation will continue to be driven by supply factors, especially from higher global commodity prices and further adjustments to domestic administered prices.

On the whole, average inflation among Malaysia’s key import source countries is expected to be higher in 2011.

“Domestically, as part of the Government subsidy rationalisation programme, a series of adjustments to the prices of administered items is expected for 2011. The impact on overall inflation will depend on the timing and magnitude of these adjustments.

“However, the price adjustments are expected to be gradual, and this will help to contain the overall impact on inflation,” it said.

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