Bloomberg News

Malaysian Growth Slows Less Than Estimated as Consumption Gains

February 28, 2012

Feb. 15 (Bloomberg) -- Malaysia’s economic growth slowed less than economists estimated last quarter as rising consumption and investment helped cushion the impact of a deepening European debt crisis.

Gross domestic product rose 5.2 percent in the three months through December from a year earlier, after expanding 5.8 percent in the previous quarter, Bank Negara Malaysia said in a statement in Kuala Lumpur today. The median of 20 estimates in a Bloomberg News survey was for a 4.8 percent expansion. The economy grew 5.1 percent in 2011, slowing from 7.2 percent the previous year.

Prime Minister Najib Razak has announced plans to raise civil servants’ pay and boost spending on roads and railways to spur growth to between 5 percent and 6 percent this year. The central bank has refrained from cutting interest rates for the past three years to manage inflationary pressures, even as neighbors from Indonesia to the Philippines cut borrowing costs in recent months to buffer their economies against weakening global demand.

“Resilient private-sector activities underpinned by public- sector support should be able to shore up domestic demand to offset the impact of an exports slump in the next few quarters to a certain extent,” Azrul Azwar Ahmad Tajudin, Kuala Lumpur- based chief economist at Bank Islam Malaysia Bhd., said before the report. “A mild slowdown should give Bank Negara Malaysia the ammunition to not tinker with interest rate.”

The ringgit rose 0.4 percent against the dollar before the report. It is the best performing currency in Asia this year after the Indian rupee. The benchmark FTSE Bursa Malaysia KLCI Index fell 0.3 percent today.

More Challenging

Malaysia’s 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.

Industrial production growth in the nation, a manufacturing base for companies including Intel Corp., accelerated in December. Inflation slowed to a nine-month low of 3 percent. While inflation has probably peaked, prices remain at a “risk- elevated level” and policy makers must be mindful of conditions, central bank Governor Zeti Akhtar Aziz said last month.

The International Monetary Fund predicts Malaysia’s growth may slow to 4 percent in 2012, saying inflation has eased and “remains contained.” Prime Minister Najib, who is required to call an election by early 2013, said last week the nation has “resilience” and “enough momentum” for 2012.

Still, “weakening external demand and easing inflation pressures in the coming months will open up room for monetary easing,” Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch, said before today’s report. There is a “high likelihood” the central bank may consider cutting rates at its next meeting scheduled for March 9, he said.

--Editors: Rina Chandran, Stephanie Phang

%MYR MAOPNEWS MAGDNEWS

To contact the reporters on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net; Michael J. Munoz in Hong Kong at mjmunoz@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net.


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