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2005 growth to top 5% 
Printable version

Dec 1, 2005 - MALAYSIA'S economy is expected to grow faster than the official forecast of 5% this year after expanding by a better-than-expected rate of 5.3% in the third quarter, thanks to the robust private sector and a rebound in the global electronics cycle.

With economic growth averaging 5.3% in the three quarters of the year, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said that full-year growth should come in at between 5% and 6%, which was the central bank's original forecast earlier in the year.

"There is greater clarity of the outlook, going forward, in respect of the impact of higher oil prices. The global economy has shown a greater degree of resilience to this and the global electronics industry cycle has shown an upturn. Malaysia will benefit from this upturn,'' she said at the release of Malaysia's economic data for the third quarter in Kuala Lumpur.

During the third quarter, domestic demand grew 9.4% due to stronger consumption and investment. Private consumption grew 10.4% and gross fixed capital formation expanded at its fastest pace this year at 9.6%, as manufacturers and the services sector ploughed more capital into their businesses.

The services sector grew 7.3% in the quarter and manufacturing, 3.4%. Mining activity expanded by 3.4% and agriculture by 0.9% but construction sector activity shrank by 1.4%.

The overall scoreboard was, nonetheless, encouraging enough for the governor to say that the prospects for the economy, as it moves into 2006 were favourable.

"Our assessment is that the positive external environment is expected to be sustained going into next year,'' she said.

Zeti said the electronics sector in Malaysia was expected to benefit from the uptrend in the global electronics cycle and that commodity prices were expected to continue to remain at high levels, which would support export growth as well as private consumption.

She said leading indicators were also showing that the economy would continue to expand into 2006.

"Indicators of investment, such as the import of capital goods, strong financing activities and the purchase of vehicles, show strong underlying investment activity,'' she said, adding that private investment was forecast to expand as new projects under the Ninth Malaysia Plan come onstream.

Commenting on the recent big outflow of foreign exchange reserves, Zeti said positions taken by traders and investors were usually squared off or unwound towards the end of the year and the trend would probably continue before new positions were taken at the beginning of 2006.

She said the inflow of investment into Malaysia was of better quality nowadays and much of it was in the higher value-added activity and in the services sector.

The scale of such investments is smaller, ranging from less than RM50mil to RM100mil compared with RM300mil to RM500mil for large manufacturing plants in the 1990s.

Net foreign direct investment inflow during the third quarter was RM900mil.


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