Feb. 14 (Bloomberg) -- Malaysian economic growth probably cooled as the European debt crisis hurt exports, dragging full- year expansion to the slowest since the global recession and putting pressure on the central bank to keep interest rates low.
Gross domestic product rose 4.8 percent in the three months through December from a year earlier, compared with 5.8 percent in the previous quarter, according to the median of 20 estimates in a Bloomberg News survey. Southeast Asia’s third-largest economy probably grew 5 percent in 2011, down from 7.2 percent the previous year, a survey of 18 economists showed.
The slowest growth since an economic contraction in 2009 may prompt Malaysia to keep borrowing costs low, as Southeast Asian policy makers from Thailand to the Philippines lower rates to buffer their economies against weakening global demand. The country, a manufacturing base for companies including Intel Corp., has refrained from easing for the past three years to manage inflationary pressures.
“Malaysia, being amongst the most open economies in the Asia-Pacific region, still remains vulnerable to the worsening global economic environment,” said Cynthia Kalasopatan, an economist at IdeaGlobal in Singapore. “We believe that Bank Negara Malaysia will likely maintain a stand-still stance but has the leeway to cut rates if the global situation worsens.”
The ringgit, the best performing currency in Asia this year after the Indian rupee, has gained more than 4 percent against the dollar. The benchmark FTSE Bursa Malaysia KLCI Index has risen about 2 percent this year, lagging behind most regional markets.
Asia’s regional slowdown has seen nations from Japan to Singapore report economic contractions last quarter. Singapore probably declined 2.3 percent in the three months through December from the previous quarter, according to the median of nine estimates ahead of final GDP data due Feb. 16. A preliminary government estimate in January showed a contraction of 4.9 percent.
Indonesia last week joined the Philippines and Thailand in cutting borrowing costs this year as easing inflation gave policy makers scope to support Southeast Asia’s largest economy.
The International Monetary Fund predicts Malaysia’s growth may slow to 4 percent in 2012, saying inflation has eased and “remains contained.”
Malaysian Prime Minister Najib Razak, who has announced plans to raise civil servants’ pay and boost spending on railways and roads to spur growth, expects the $238 billion economy to expand between 5 percent and 6 percent this year. The nation has “resilience” and “enough momentum” for 2012, he said last week.
Malaysia’s industrial production growth accelerated in December as manufacturing and electricity output increased. Inflation slowed to a nine-month low of 3 percent in December. While inflation has probably peaked, prices remain at a “risk- elevated level” and policy makers must be mindful of conditions, Bank Negara Governor Zeti Akhtar Aziz said last month.
The central bank left the benchmark rate unchanged at 3 percent for a fourth straight meeting last month, and said the global environment will become “more challenging.” It last raised borrowing costs in May.
Across the Asia-Pacific region, Japan this week reported a fourth-quarter contraction that was worse than economists estimated. China’s exports and imports fell for the first time in more than two years in January, and Premier Wen Jiabao said this week the country needs to start “fine-tuning” economic policies this quarter.
“External headwinds have picked up strongly in the fourth quarter of last year,” said Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore. “Real export growth is unlikely to pick up significantly until a more pronounced improvement in global outlook materializes.”
--Editors: Rina Chandran, Stephanie Phang
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