News Room - Business/Economics

Posted on 15 Jan 2008

Malaysia's GDP projected to grow by 6% to 6.5% despite rising oil prices

The country's stock market is not only buoyed by speculations about the upcoming elections but is ultimately driven by strong economic fundamentals, said Second Finance Minister Tan Sri Nor Mohamed Yakcop.

He said: "There is, of course, a bit of sentiment but it wouldn't have performed so well without confidence in the overall strength of our economy and leadership."

Malaysia, he said, is optimistic about achieving at least 6% growth in gross domestic product (GDP) this year, adding:

"This is because growth for the third quarter was on the uptrend at about 6.7%. Given this, we were able to achieve higher than 6% in the last quarter.

"For this year, our forecast is about 6% to 6.5%. This is despite uncertainties in the US market and rising crude oil prices," he said, adding that the sub-prime crisis in the United States had become a full-fledged housing crunch problem coupled with consumption inflation.

"But we have been through these problems before. Our stock market reflected this by shooting past 1,500 points last Friday. Four years ago, it was hovering around 790 points with a market capitalisation of around RM640bil, and our per capita income was around RM15,819.

"Today, market capitalisation is almost RM1.2tril and per capita income has risen to RM22,345. This means that in the last four years, we have created an increased wealth of 86.5% or over RM500bil in our stock market," he pointed out.

Asked about reports that a foreign company was interested in acquiring a 10% stake in Bursa Malaysia, Nor Mohamed said the Treasury had not received any direct proposal on the matter. Still, he said he was aware that there "were substantive discussions" going on.

On the sale of non-performing loans by some banks, such as Maybank to Standard Chartered, Nor Mohamed said this was not likely to lead to a sub-prime crisis as experienced in the United States.

"In the case of US, the loans were given out to those who were undeserving. But in our case, the party is confident of collecting on those loans," he said.