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Malaysian economy expected to pick up steam in latter part of year [20-03-2012]  
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The Malaysian economy is likely to pick up momentum in the latter part of 2012 as improving external conditions boost demand for the electrical and electronic products.

Expectations by a Business Times poll are for the economy to grow at an average moderate pace of 4.41 per cent this year.

The gross domestic product (GDP) will probably grow by 5.28 per cent come 2013.

The International Monetary Fund has projected Malaysia's economy to slow to 4 per cent in 2012 and expects inflation to ease and remain contained.

Bank Negara Malaysia will release its annual report of financial developments tomorrow. But it will yet be known if the central bank will release the official forecasts before the Treasury does during the presentation of the fiscal budget.

Bank Islam chief economist Azrul Azwar Ahmad Tajudin says there is a possibility for the central bank authorities to revise the official 2012 GDP growth forecasts to a 4-5 per cent range instead of 5-6 per cent.

When the fiscal budget was released last October, the official growth forecast was kept within a 5-6 per cent range.

Almost all of the research houses left their 2012 forecasts intact, encouraged by the recent numbers which point to a resilient domestic demand. RHB Research revised the growth forecast upwards from 3.6 per cent to 4.5 per cent.

Citi has maintained its above consensus 5 per cent growth forecast for 2012, based on a modest manufacturing-led slowdown with growth bottoming at 4-4.5 per cent in the first quarter of the year.

"Base effects and the composite leading indicators suggest a near-term slowdown but more favourable base effects, bottoming electrical and electronics (E&E) exports and fiscal lift should see a pick-up from the second quarter."

It said that while the E&E cycle is highly correlated with G3 (the US, the EU and Japan) growth, Malaysia has typically lagged the North Asian NIEs (newly industrialised economies) by about a quarter or so.

HSBC Bank senior economist Frederic Neumann pointed out the agility of Asia's smaller economies which have shown better data in recent months.

On the other hand, China and India have struggled from the effects of the eurozone and external headwinds.

"In Asia's smaller economies, data surprised largely on the upside in recent months, with healthy gains in industrial production, exports, and local spending

"In part, this is because smaller markets are more sensitive to the global cycle, which shows signs of stabilisation," Neumann added.

He said Asean and Asian tigers Hong Kong, South Korea, and Taiwan don't face the fundamental imbalances that plague their larger neighbours.

Stronger data are expected to remain with a background of liquidity flush and this flood of money provides the biggest kick in Asia's smaller markets, easing sharply financial conditions and spurring growth.

Asean economies have regained a competitive niche as wages in China soar, and India's manufacturing sector remains shackled by inadequate infrastructure, with foreign direct investment pouring back into places like Indonesia, Thailand, and Malaysia.

Neumann said although Asean economies' dependency on external demand has declined in recent years, Malaysian, Thailand and the Philippine economies should have extra strength from fiscal boost this year.

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