Malaysia's central bank expects growth at five to six per cent this year
BANK Negara Malaysia (BNM) yesterday projected a rosier picture for the Malaysian economy this year and revised upwards its growth outlook to between five and six per cent.
It came in above the 4.5-5.5 per cent projection by the Ministry of Finance at the release of the fiscal budget in September last year.
BNM governor Tan Sri Dr Zeti Akhtar Aziz said the economy, which grew by 5.6 per cent in 2012, remains on a steady growth trajectory and domestic demand will continue to become the main driver of growth.
Consumption demand will return to its steady and sustainable growth path of six to seven per cent, she said, despite exceptional growth in 2012.
"At six to seven per cent, it is sustainable. We don't want consumption to be spurred by excessive borrowings beyond the growth of disposable income," she said at the release of the central bank's 2012 annual report here yesterday.
The external demand will offset the moderation in consumption projected in 2013 as trade is expected to improve on the back of better intra-regional trade, which will also show an improvement in net exports this year.
On the supply side, all economic sectors are expected to expand this year, with the services and manufacturing sectors seen as the key drivers, growing by 5.5 per cent and 4.9 per cent, respectively.
BNM's views were shared by market analysts.
CIMB Investment Bank director of economic research Lee Heng Guie felt that while consumption and investment, the domestic catalysts, will continue to anchor growth, the cyclical upturn in exports should improve economic prospects.
MIDF Research economist Anthony Dass expects the domestic economy to remain resilient this year as local demand, mainly from private expenditure, continues to spearhead growth.
Fiscal policy consolidation and addressing the public debt limit will be the centre of attention this year, along with continued efforts to sustain growth momentum and facilitate the long-term transformation of the economy.
Asked to comment on the government debt and the systemic risks it poses to the economy, Zeti said:
"The election is taking place when the economy is doing well ... unlike in Europe where it is faced with issues like unemployment, financial system, (and) credit flow (that has) not resumed."
She said the fiscal consolidation process by the government has already commenced, pointing out that the fiscal deficit has reduced to below five per cent.
"As long as the direction is there, the deficit will continue to be reduced and there will be a reduction in government fiscal indebtedness. Government revenues have improved significantly."
On the narrowing of the current account and balance of payments, she said there was less concern because the current account balance is still expected to remain in a surplus of about 4.4 percent of gross national income.
"The continued investment activity, especially in high value-added and productive sectors, is expected to improve Malaysia's competitiveness, sustain demand for exports, and improve our capacity in terms of imports for investment activity."
Zeti said the Financial Services Act 2013, which will give BNM greater powers, will be gazetted and implemented in the first half of 2013.