Friday, July 18, 2008

Malaysia's 2008 growth forecast cut to 4.6pc

By Biz Times
THE Malaysian Institute of Economic Research (MIER) has cut its forecast for the country's economic growth to 4.6 per cent from 5.4 per cent this year amid rising inflation and political uncertainties."It is likely that growth which would exceed five per cent in the first half, would deteriorate in the second half of the year as the economy takes the hit from the knock-on effects of higher oil prices and slower growth of our trading partners," said executive director Professor Datuk Mohamed Ariff Abdul Kareem.Speaking at a briefing in Kuala Lumpur yesterday, he warned that the current political instability may put off stock market investors as well as tourists."We are still one of the better economies in the region - comfortable foreign reserves, high savings rate, potential strength of the ringgit, high commodity prices, sound banking system - all support the economy, but if we can do something about the political situation I think the economy can do better than it can."

Domestic demand will be propped up by government spending, which would partly cushion the blow from a faltering global economy.MIER expects the economy to improve next year, expanding by five per cent. However, this could change if a global recession affects commodity prices.Soaring food pries and the rise in global oil prices are weighing heavily on economic prospects."Even with the subsidy cut, the fiscal deficit may reach 3.5 per cent of GDP this year as oil prices have increased further, drastically reducing the savings from the subsidy revision. The government would still have to fork out RM18 billion or more for fuel subsidy due to the subsequent hikes."