Posted on 12 Apr 2010
HSBC Holdings plc senior Asian economist Robert Prior-Wandesforde expects
His forecast for 2010 was revised from the 6.8% made last year and higher than Bank Negara’s forecast of 4.5% to 5.5% in the 2009 annual report.
“We’re looking at a very vigorous V-shaped recovery from the exports side for Asia and
He said there were also signs that private consumption had risen strongly due to confidence in the economy returning.
However, Prior-Wandesforde said while indications suggested growth would be broad-based this year, growth levels would not sustain beyond 2010 but return to trend growth of 4.5% to 5% annually in the next five to 10 years on structural impediments.
He said the reforms suggested by the National Economic Advisory Council to the Government and encapsulated in the recently unveiled New Economic Model were sensible but a lot depended on the delivery.
“Clearly the aim is to raise growth via structural reforms but this will take time. How this is enforced will be crucial as generally, there’s a lot of room for improvement,” he said, citing bureaucratic red tape and corruption among the reasons why foreign direct investment had dropped and domestic investors had invested abroad.
He said there was currently scepticism among investors that the reforms would be implemented. “Investors will need a lot more convincing,” Prior-Wandesforde said.
He expects Bank Negara to raise the rates of the country’s benchmark policy rate – the overnight policy rate (OPR) – by another 75 basis points to 3% this year.
“Any raising of the OPR by Bank Negara should be seen as a normalisation,” Prior-Wandesforde said, adding that this meant the minimal level for policy rates to be considered normal would be 3%. The OPR currently stands at 2.25% after Bank Negara raised it by 25 basis points in March.
On Thursday, the World Bank’s lead economist for
