News Room - Business/Economics

Posted on 26 Mar 2009

V-shaped recovery for Malaysian economy seen

A V-shaped recovery for the Malaysian economy is possible, with strong growth seen next year, said Robert Prior-Wandesforde, a Singapore-based economist with Hong Kong and Shanghai Banking Corp (HSBC).

Prior-Wandesforde has projected that the local economy will contract 3.5% this year, but will rebound by 5.5% in 2010.

"It does look like a V-shape recovery (is possible)," he told the audience at a seminar organised by the Malaysian Economic Association in conjunction with the release of Bank Negara's annual report 2008 yesterday.

"A V-shape recovery is a norm in this region,'' he added.

Prior-Wandesforde cited Malaysia's strong economic fundamentals, like many countries across Asia, as a major factor for the recovery, noting that leading indicators in China have also turned positive, which would help in the region's rebound. But in the short term, things are likely to get worse before it gets better.

Prior-Wandesforde sees Malaysia's gross domestic product (GDP) contracting 3% in the first quarter, before bottoming out at -5% in the second quarter.

Bank Negara assistant governor Dr Sukhdave Singh said "our view is that the economy will stabilise in the second half," as the impact of interest rate cuts and stimulus packages filter through the economy.

He added that the first half of the year would be "quite negative," but this was partly due to the "high base" impact from a year earlier.

The Malaysian economy grew 7.4% during the first half of 2008.

The central bank is also expecting growth to pick up in 2010, but cautions that the recovery is dependent on various factors such as external developments.

Sukhdave said the ringgit's movement against the US dollar would remain volatile in the coming months, but it would move in tandem with other regional currencies.

"Our view is that the US dollar movement will continue to be event-driven, rather than fundamentally-driven,'' he said.