News Room - Business/Economics

Posted on 05 Nov 2009

GDP seen to contract 2.3% this year but grow 4.1% next year

Malaysia’s near-term outlook shows a slow process of recovery, with real gross domestic product (GDP) projected to contract 2.3% this year before growing by 4.1% next year, the World Bank said in its latest update on Wednesday.

 

In its half-yearly assessment of the economic health of East Asia and Pacific region released yesterday, it said the revised projection showed lower growth compared with minus 1% forecast in April.

 

It said consumption and fixed investment growth would remain relatively subdued due to uncertainties on the global outlook, efforts of fiscal consolidation and still low levels of capacity utilisation.

 

The turnaround in the inventory cycle is expected to be the main growth driver, it said, adding that import growth would continue to outpace export growth in the coming quarters, resulting in a smaller trade surplus.

 

The current account balance is expected to decline to 12.3% of the GDP this year and further to 12.1% next year.

 

The update, titled Transforming The Rebound Into Recovery, said large and timely fiscal stimulus spending in most East Asian and Pacific countries led by China and South Korea, along with a powerful inventory restocking process now under way, have driven the rebound in the region and contributed significantly to confidence in a global pick-up.

 

Developments in the region remain strongly influenced by China as the projected GDP increase this year will offset three quarters of decline in the GDPs of the United States, the euro zone and Japan.

 

With the projected 8.4% growth in China this year and the country’s domestic demand racing ahead global demand, countries exporting consumer durables, electronic components and raw materials to China have felt the positive flow-on effects.

 

As a result, the World Bank is projecting 6.7% growth this year for developing East Asia and the Pacific and 7.8% next year.

 

Though Indonesia and Vietnam were performing well, East Asia, excluding China, is expected to grow at around 1% this year, more slowly than South Asia, Middle East and North Africa and only slightly stronger than Sub-Saharan Africa.