Gravity-defying boom

SWEET SPOT: Malaysia’s economy helped by strong growth

KUALA LUMPUR: MALAYSIA has received the thumbs up from foreign analysts and media on how it manages the economy.

Analysts, both local and foreign were stunned on Wednesday following Bank Negara’s announcement that the country was growing at a much faster pace than anticipated.

The central bank backed this, when it announced a 5.4 per cent growth in economic activities between April and June, spurred by the investments in both private and public sector spending.

For the first half of the year, the economy clocked a 5.1 per cent growth.

The strong results, at a time when most economies in the world are suffering, immediately caught the eye of the foreign media.

In recent days, Malaysia’s economy has been described to be in a “sweet spot” helped by strong growth and a subdued inflation trajectory.

Read more: Gravity-defying boom - Top News - New Straits Times

Fed lowers outlook for economy through 2011

Fed lowers outlook for economy through 2011, citing worse than expected growth

Christopher S. Rugaber, AP Economics Writer, On Tuesday November 23, 2010, 2:40 pm EST

WASHINGTON (AP) -- Federal Reserve officials have become more pessimistic in their economic outlook through next year and have lowered their forecast for growth.

The economy will grow only 2.4 percent to 2.5 percent this year, Fed officials said Tuesday in an updated forecast. That's down sharply from a previous projection of 3 percent to 3.5 percent. Next year, the economy will expand by 3 percent to 3.6 percent, the Fed said, also much lower than its June forecast.

Fed officials project that unemployment won't change much this year, averaging between 9.5 percent and 9.7 percent. The current unemployment rate is 9.6 percent. Progress in reducing unemployment has been "disappointingly slow," the central bank said, according to the minutes of its Nov. 2-3 meeting.

The darker view helps explain why the Fed decided at its meeting earlier this month to launch another round of stimulus. The central bank plans to buy $600 billion in Treasury bonds over the next eight months in an effort to lower interest rates and spur more spending.

The Fed is slightly more optimistic about 2012, in part because officials expect the bond-buying program to have a positive impact. The economy should grow 3.6 percent to 4.5 percent that year, a tick better than June's forecast of 3.5 percent to 4.5 percent.

The economy will also grow 3.5 percent to 4.6 percent in 2013, the central bank said, the first time it has issued projections for that year.

The economic outlook was prepared at the Fed's meeting earlier this month and released Tuesday. It reflects the views of the Fed's board of governors and its regional bank presidents.

The jobless rate will be 8.9 percent to 9.1 percent in 2011, Fed officials predict. That's much worse than June's projection of 8.3 percent to 8.7 percent.

By 2012, when President Barack Obama faces the electorate, unemployment will be 7.7 percent to 8.2 percent, up from the previous forecast of 7.1 percent to 7.5 percent.

The Fed's forecasts of a slow economy with only gradual improvement in the job market are broadly similar to those by private economists. An Associated Press survey of 43 leading economists last month found that they expect the economy to expand just 2.7 percent in 2011, after growing only 2.6 percent this year.

The unemployment rate will remain at 9 percent by the end of 2011, the economists said.

The Fed said that data released since its last projections showed the economy was weaker in the first half of this year than it previously thought. The economy grew at only a 1.7 percent annual pace in the April-June period, much lower than the first quarter's 3.7 percent rate.

Consumers are still holding back on their spending, the central bank said, and recent reports on housing, manufacturing, international trade and employment were all weaker than expected at the June meeting.

The central bank expects prices will remain in check. Inflation is projected to rise 1.1 percent to 1.7 percent in 2011, little changed from the previous forecast of 1.1 percent to 1.6 percent.

DJ UPDATE: Malaysia March Exports Rise 36.4%, Beat Forecast

By Elffie Chew Of DOW JONES NEWSWIRES

KUALA LUMPUR (Dow Jones)--Malaysia's exports rose in March at a faster-than-expected pace amid improving global demand, likely helping the economy grow more than 8% in the first quarter and reinforcing expectations of a rate hike this month, economists said.

Exports surged 36.4% from a year earlier to MYR59.44 billion ($18.58 billion), the highest since September 2008, the Ministry of International Trade and Industry said in a statement Tuesday. The median forecast of 15 economists polled by Dow Jones Newswires was for an on-year increase of 21.5%.

The ministry attributed the rise to a 32% increase in overseas shipments of electrical and electronic products, which account for almost 40% of the country's exports.

The strong reading ups the chances that the central bank will raise rates when it meets on May 13, analysts said.

HSBC Senior Asian Economist Robert Prior-Wandesforde predicted a 25 basis point hike this month and a further 50 basis points later in the year.

"The hikes may not even stop there, depending on whether (Bank Negara Malaysia) Governor Zeti feels the need to push rates above 'normal,'" Prior-Wandesforde said.

Exports of palm oil, liquefied natural gas, chemicals and chemical products, crude petroleum and refined petroleum products also posted an improvement, the ministry said.

On-month, March exports were up 26.9%.

Imports surged 45.3% to MYR45.09 billion due to higher shipments of intermediate goods, the ministry said. The median forecast was for a 28.9% expansion. From a month earlier, imports surged 28.2%.

The trade surplus for March was MYR14.35 billion, higher than February's MYR11.67 billion.

The better-than-expected rise in exports was in line with the regional trend, which bodes well for Malaysia's first-quarter economic growth, economists said.

Most economists are projecting Malaysia's gross domestic product to have grown 7%-8% in the first quarter. The country is expected to release the numbers in the third week of May.

The trade-driven economy expanded 4.5% from a year earlier in the last quarter of 2009.

-By Elffie Chew, Dow Jones Newswires; (603) 2026 1233; elffie.chew@dowjones.com

Malaysia economic recovery is firmly established

KUALA LUMPUR: Bank Negara Malaysia (BNM) has raised the Overnight Policy Rate (OPR) by 25 basis points to 2.25% at its monetary policy committee (MPC) meeting on Thursday, March 4 as the economic recovery is firmly established.

However, Indonesia's central bank kept its key interest rate on hold at a record low of 6.5% on Thursday and said it will keep it there if inflation is on target.

BNM said the domestic economy has since improved significantly and is now on a path of recovery. Given this improved economic outlook, the MPC decided to adjust the OPR towards normalising monetary conditions and preventing the risk of financial imbalances that could undermine the economic recovery process.

"At the new level of the OPR, the stance of monetary policy continues to remain accommodative and supportive of economic growth," BNM said.

BNM said in the domestic economy, the stronger growth performance in the fourth quarter of 2009 affirms that the economic recovery is firmly established.

"Going forward, growth is expected to strengthen further, supported by domestic demand and continued improvement in external demand, particularly from the regional economies," it said.

BNM said the OPR was reduced to historic lows in early 2009 as a key measure to avert a severe and fundamental economic downturn but "these conditions no longer prevail".

On inflation, the central bank expected prices would gradually increase during the year, reflecting the prevailing economic conditions and taking into account possible adjustments in administered prices.

While external factors, including rising global commodity and food prices, may exert some additional upward pressure on domestic prices, it expected inflation to remain moderate in 2010.

As for the floor and ceiling rates of the corridor for the OPR, BNM said they were correspondingly raised to 2% and 2.50% respectively.

Meanwhile, Reuters reported that Indonesia's central bank kept its key interest rate on hold at a record low of 6.5 percent on Thursday and said it will keep it there if inflation is on target.

But the comments, which Bank Indonesia (BI) has repeated over the past three months, failed to alter expectations that rates will rise by the end of the third quarter.

"The main objective for keeping rates anchored is largely to support credit growth for the economy which is beginning to turn around," said Prakriti Sofat, regional economist at Barclays Capital in Singapore.

"Going forward we think the two factors that will be dominant would be the inflation outlook itself and the development of the credit growth."