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Malaysian economy fuelled by domestic demand [13-02-2012]  
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The Malaysian economy showed resilience in the fourth quarter of 2011 although it was not spared the brunt of the external uncertainties.

A poll of economists showed expectations lean towards a weaker fourth quarter gross domestic product growth with an average of 4.94 per cent (from 5.8 per cent in the third quarter) which brings the average growth outlook to 5.53 per cent for 2011 and 4.14 per cent for 2012.

AmResearch economic research director Manokaran Mottain says Malaysia can expect to maintain a commendable growth rate in the final quarter of 2011, as evident from the trade and manufacturing data which were released last week.

Industrial output data, which beat market expectations, expanded at a faster rate, registering a three month-high growth.

OCBC Bank economist Gundy Cahyadi said the 10.4 per cent year-on-year import growth showing in December provided some encouraging signs on domestic demand in Malaysia.

"This was a point of concern that we had earlier brought up following the somewhat sluggish third quarter GDP data," he added.

Bank Negara will publish the fourth quarter data on Wednesday.

Nomura Research economists said the softening in exports is being capped by still-robust domestic demand, reflected in strong import growth and the upside surprise in industrial production. This in turn was likely driven by private consumption and government spending, ahead of the elections, they said.

US investment bank Citi expects things to look up for the electrical and electronics (E&E) sector in the second quarter.

"Our US Electronics Leading Indicator has bottomed, with an encouraging pick-up in December.

"Local chip manufacturers have guided that the sector should begin to recover in the second quarter, though the still sizeable inventory overhand may constrain the pace of recovery," it said.

But CIMB Investment Bank chief economist Lee Heng Guie said the fourth quarter's data confirms the still-weak economic growth momentum ahead.

"Malaysia's industrial production growth continues to remain in the slow lane. Overall, we maintain a cautious industrial growth outlook for 2012, largely reflecting the general weakness in external demand across key markets."

Although the global Purchasing Managers' Index remained above 50 points in January for the second straight month, it still moderated compared to trend line growth.

"Domestic demand, albeit slower, acted as an insulator to keep the economy going as export growth is expected to pull back sharply on cooling global demand," added Lee.

Citi pointed out that the loan surge paints a picture of domestic demand resilience with business loans having taken over as the larger driver of loan growth.

Construction contract awards also gained momentum and January saw the first Klang Valley MyRapid Transit awards and by April, Mass Rapid Transit Corp Sdn Bhd would have awarded 90 projects.

Meanwhile, Mottain said Malaysia's growth is likely to slip below the average trend growth in the first half of 2012, in line with the slowdown in major economies but a sharp rebound is expected in the second half.

"We expect to see some stability in euro economies by the end of the year, stronger US economy in the coming quarters, following the anticipated QE3 as well further roll-down of major Economic Transformation Programme projects in the coming months, he said, adding that the inflation pressures will also ease.

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