With many of Malaysia's economic sectors having performed solidly over the past 12 months, the country is poised for another strong performance this year, says Oxford Business Group (OBG), a global publishing and consultancy company.
Though final figures have yet to be issued, OBG said it was expected that the Malaysian economy would have expanded by more than 5% in 2011.
OBG said the country's foreign direct investments (FDIs) had gone up while inflation was well contained and the financial sector remained steady.
However, it cautioned that there could be some impact from the European debt crisis, with demand for exports widely predicted to ease this year.
OBG said after having successfully ridden out the global financial crisis of 2008 and 2009, Malaysia's economy appeared to be well placed to continue its progress into 2012 and beyond.
At the end of November, the Organisation for Economic and Cooperative Development (OECD) forecast that this solid rate of growth would continue for at least the next five years, predicting that Malaysia's gross domestic product (GDP) would expand by 5.3% in each of the next few years and hit 5.6% by 2016.
OBG said the OECD's forecast was somewhat more optimistic than the Asian Development Bank or the World Bank, which was looking at a growth for Malaysia's GDP rising by 4.7% and 4.9% respectively, in 2012 although it was roughly in line with the International Monetary Fund's projection of 5.1%.
“Whatever the ultimate figure, it will be well in excess of those of Malaysia's European and North American trading partners and in advance of most regional and global economies,” OBG said.
Along with the GDP, Malaysia's balance of payments figures were also positive in 2011, with the current account surplus standing at US$23.8bil for the nine months ended Sept 30, an 18% increase on the US$20.2bil posted in the same period last year.
However, OBG said there were some concerns that Malaysia's export trade could suffer in 2012, as major segments of the global economy could flirt with recession.
While Malaysia's exports rose by a healthy 15.8% in October, this rate of increase was lower than that of the previous month, though still above the 9.1% rise spread over the first 10 months of the year, it said.
OBG said while overseas trade might raise a few concerns in the coming year, the same was unlikely to be the case with inflation.
The latest figures released in November by the Statistics Department showed inflation had remained fairly steady, with consumer prices rising by 3.4% year-on-year in October.
Inflation could ease further in 2012, dipping to between 2.5% and 2.8%, OBG said.
This would be a result of a slowing of demand, and a slight deceleration of growth, with commodity prices moderating, it said.
The publishing group also said there was more reassuring news in a recent report from a ratings agency, Fitch, which said the Malaysian banking sector was also in good shape as the year came to a close and was well placed to ride out a renewed bout of economic retreat.
The report, released in mid-December, said the outlook for Malaysian lenders was stable though household debts, currently running at 76% of 2010 GDP, remained high.
Local banks had put in place satisfactory risk management, the report said, adding that the impact of higher credit costs resulting from a general weakening of the global economy could largely be absorbed through banks' earnings, leaving limited risk of capital erosion.
OBG said another sign of the stability and appeal of the Malaysian economy came in the form of inflows of FDIs, which rose by 43% to US$8.3bil during the first nine months of the year in comparison to the same period in 2010.
Indeed, the year-end total for 2011 was likely to meet or exceed the US$10bil forecast by the government, it said.
However, OBG said it was possible that Malaysia might struggle to match this total in 2012, with some indications that FDIs might be drying up as eurozone economies moved ever closer to recession, a move that could reduce global investor sentiment.
“Though there were still positive FDI inflows in the third quarter, the US$1.6bil between July and September 2011 was some 50% less than in the previous quarter, reflecting uncertainties and growing caution among international investors. This unease could well continue into 2012,” it added