Malaysian Rating Corp Bhd (MARC) may revise downwards its gross domestic product (GDP) growth target of 5.3% for the country this year.
“The GDP growth number we are looking at, for the second quarter of 2011, is between 3.5% and 4%. If that materialises, then the overall picture for this year is not as robust as I initially thought it would be. But we should still have a GDP growth of 4% to 5% (for the full year),” MARC chief economist Nor Zahidi Alias said on the sidelines of the company’s 2011 CEO Breakfast Forum yesterday.
For the first quarter of 2011, Malaysia recorded a GDP growth of 4.6%.
To recap, in May this year, Malaysia’s exports grew by 5.4% year-on-year to RM55.1bil, while imports rose by 5.6% to RM46.6bil, according to a recent Statistics Department statement.
However, in May, both exports and imports declined month-on-month by 4.7% and 0.4% respectively.
Also, the sales value of the manufacturing sector in May this year decreased by 3.7% month-on-month although it posted a year-on-year growth of 8% to RM47.8bil.
Meanwhile, the Industrial Production Index (IPI) in May decreased by 5.1% year-on-year.
Guest speakers at the forum, which was moderated by MARC chief executive officer Mohd Razlan Mohamed, were Malaysian Industrial Develop-ment Authority (Mida) chairman Tan Sri Dr Sulaiman Mahbob and Institute of Strategic and International Studies (ISIS) senior analyst Dr Muhammed Abdul Khalid.
The forum also saw the launch of the book entitled “Musings of a Financial Economist”, which is an anthology of Nor Zahidi’s past articles in Malaysian Business magazine.
Sulaiman said Mida’s current policy was to increase the level of domestic direct investment (DDI) in the economy.
He said, as an example, for the past five to six years, the ratio of investments was about 60:40 in favour of foreign direct investment (FDI) in the manufacturing sector.
“Our target is a 50:50 ratio. Currently, DDI is largely in the areas of plantation, construction and SMI (small and medium industries). However, we have not set a targeted timeframe to achieve this,” he told reporters after the forum.
Sulaiman explained that a higher level of DDI would result in higher domestic value-added content, stronger potential for intellectual property asset creation and a buffer during a global economic slowdown, among other benefits.
Sulaiman also pointed out that the services sector in Malaysia had a very high proportion of DDI.
According to Mida, DDI accounted for 88% of the RM247.4bil invested in the services sector from 2006 to 2010.
Meanwhile, Muhammed Abdul said the Government’s Economic Transformation Programme (ETP) needed to look at issues from the perspective of the man in the street.
He pointed out that while the country recorded an average annual GDP growth of 5.3% from 2000 to 2009, employment wage growth was only 2.6% per annum against a backdrop of a 3.2% per annum growth in the consumer price index during the same period.
Muhammed Abdul also spoke about income inequality which had widened since 1970, and cited reports in 2010 that about 34% of 1.3 million workers earned less than RM700 a month (below the poverty line of RM720 per month), based on a study by the Human Resources Ministry.
“Do we consider economic well-being or do we focus on FDI?” he questioned.