News Room - Business/Economics

Posted on 27 Mar 2008

Economy seen growing 5% - 6% (Malaysia)

THE Malaysian economy is projected to expand by 5% to 6% in 2008, slower than last year's 6.3%. 

“As a small and highly open economy, the outlook will be influenced by the current high degree of uncertainties in the global economic and financial environment, including problems associated with the international credit markets and financial institutions,” Bank Negara said.

These uncertainties would have some impact on Malaysia, mainly through the trade and financial markets linkages. However, it said, the resilience of the Malaysian economy to weather a slowdown in the global economy had strengthened over the years. First is the emergence of domestic demand as a key driver of growth.

“The strong economic growth of 6.3% in 2007 was achieved due to the robust expansion in domestic activities despite a moderation in external demand,” it said.

Second, Malaysia's export markets are increasingly diversified, with almost 54% of total exports going to the Asian ex-Japan economies compared with 46.2% in 2001.

Meanwhile, the share of Malaysia's exports to the US declined to 15.6% in 2007 from 20.2% in 2001.

Thus, while global growth is expected to moderate in 2008 due mainly to slower growth in the US, and to a lesser extent, in Europe and Japan, the outlook for strong economic growth in the Asian region and other emerging economies would support the export sector. Third, as a commodity producer, Malaysia will continue to benefit from high prices of crude oil, palm oil and rubber.

In addition, the strong base in the commodity sector would further strengthen the linkages with downstream activities, including the resource-based industries which will continue to benefit from the robust domestic demand as well as demand from the regional economies, Bank Negara said.

All economic sectors are projected to record strong growth in 2008, except manufacturing, which is forecast to moderate to 1.8% from 3.1% last year.

This is due to the expected weak performance of the export-oriented industries in an environment of projected moderation of global economic growth.

Nevertheless, the impact is expected to be softened by sustained growth in the semiconductor segment led by demand emanating from the Asia-Pacific.

The Beijing Olympics 2008 as well as the expansion in mobile penetration in emerging markets are anticipated to generate strong demand for semiconductors.

However, the non-electronics and electrical industries, particularly domestic-oriented and selected resource-based industries that export mainly to the region, are expected to perform favourably during the year.