June 24, 1999
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| June 24, 1999 | atimes.com | |
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| Southeast Asia SG revises Malaysian GDP outlook upward KUALA LUMPUR - The Asian-based securities house SG Securities Research has revised its earlier projection for Malaysia's gross domestic product (GDP) growth for this year to 3.1 percent from 2.5 percent previously. It sees growth rebounding gradually in the second quarter and into 2000. In a report released through the National Economic Action Council (NEAC) here today, SG Securities said the real economy is now showing sustained signs of revival, with key indicators pointing to better conditions. The forecast by SG Securities far exceeds the 1.0 percent growth forecast by the Malaysian government. The report also projects Malaysia's real GDP growth for 2000 and 2001 to be about 5.5 percent and 6.1 percent respectively. ''Although we have been more optimistic than most of a recovery, we sense that the region is now reviving faster and that this will help Malaysia, particularly as intra-Asian trade increases,'' it adds. The GDP growth forecasts for South Korea have also been raised to 5.9 percent and for Singapore to 4.3 percent, and there is a projection of a lower rate of decline for Hong Kong. In Malaysia, SG Securities said that already key parts of the economy are picking up sharply. Industrial production has risen again, boosted by the electronic recovery and strong export growth, with a steady uptrend in U.S. dollar terms. Domestic confidence, meanwhile, can now be seen in the pick-up in consumption, with car sales rebounding. SG Securities pointed out that a key aspect to its GDP upgrade is stronger personal consumption expenditure, now forecast to rise by close to three percent instead of the one percent estimated. ''Although foreign perception took a hit last year, the evidence is that direct foreign investment is still high and the global bond issue in June was a key step in Malaysia's rehabilitation into the global capital market,'' it said. This was crucial in providing liquidity, the securities house stressed. SG Securities also expects that the loose monetary policy will continue its downward bias on money market rates, with solid funds flows into the economy via the current and capital accounts, and that externally-driven liquidity will be high. Under the fixed exchange rate, the impact is a direct injection of liquidity and the three-month Kuala Lumpur Interbank Offer Rates (KLIBOR) are expected to fall further to 2.8 percent. ''However, we expect Bank Negara Malaysia to continue to effectively subsidize banks by keeping the intervention rate higher,'' said SG Securities. As this rate sets the Base Lending Rate (BLR), the banks are able to make excess profits by effectively playing the yield curve. Although this hits the real economy, the securities house explained, ''it is positive in allowing banks to recapitalize faster and hence let them become more aggressive in disbursing loans.'' Already, loan growth is picking up, it noted. ''We are seeing high levels of loan repayments - indicating financial restructuring underway - which mask equally high levels of new disbursements,'' it said. Touching on inflation, SG Securities expects it to remain low until well into next year, as growth stays below trends and the monetary aggregates takes time to impact. The report projects that Malaysia's inflation rate for 1999, 2000 and 2001 will be 2.0 percent, 2.8 percent and 3.3 percent respectively. (Asia Pulse/Bernama) | |||||||||
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