KL cuts 2003 growth forecast to 4.5%, eases forex rules<\/p>\n
Eileen Ng, Agence France-Presse, Kuala Lumpur<\/p>\n
Malaysia on Wednesday slashed its economic growth forecast for
\nthis year to 4.5 percent from 6.0-6.5 percent and announced the
\neasing of foreign exchange rules to woo investors.<\/p>\n
The central Bank Negara Malaysia, in its 2002 annual report,
\nwarned gross domestic product (GDP) growth could slide even lower
\nif global economic uncertainties persist.<\/p>\n
Bank Negara governor Zeti Akhtar Aziz said the 4.5 percent
\nforecast, up slightly from 4.2 percent growth recorded last year,
\nwas in line with expectations in other Asian economies that the
\npace of growth last year would be sustained into 2003.<\/p>\n
Growth was expected to be propped up by a recovery in private
\ninvestment, which rebounded in the second half of last year after
\ntwo straight years of decline. Private investment growth is
\nforecast at 8.1 percent this year, she said.<\/p>\n
Some pick-up in the global electronics industry, firm
\ncommodity prices and a further expansion in intra-regional trade
\nwere other favorable factors.<\/p>\n
"The underlying trend is for the Malaysian economy to expand
\nby 4.5 percent," Zeti said.<\/p>\n
But she warned that GDP growth would be weaker than expected
\nif the recovery in private investment failed to gain momentum.<\/p>\n
Bank Negara said exchange control rules would be further eased
\nas part of ongoing efforts since November to provide a conducive
\nbusiness environment and boost efficiency.<\/p>\n
From April, a rule requiring non-resident controlled firms to
\nget at least half of their loans from Malaysian-owned banks will
\nbe lifted.<\/p>\n
Firms will have more freedom to sell foreign exchange forward
\ncontracts.<\/p>\n
Exporters can retain more proceeds in their foreign currency
\naccounts and need not report every transaction in excess of
\n100,000 ringgit. They need only submit quarterly and annual
\nreports.<\/p>\n
Economists said Malaysia's move to cut its growth forecast
\namid the U.S.-led war in Iraq was expected as a slowdown was
\nalready underway.<\/p>\n
But they found the 8.1 percent growth forecast for private
\ninvestment too bullish given the weak global economy and said
\nfurther liberalization was necessary for Malaysia to cope with
\nstiff competition from China and other regional economies.<\/p>\n
"Malaysia faces an uphill battle to attract more foreign
\ninvestment. It needs to do a lot more to open up the economy,
\nopen up sectors and cut tax rates," said Paul Schymyck, economist
\nwith Singapore-based IDEAglobal.<\/p>\n
He urged the government to eventually dismantle its fixed
\nexchange rate, pegged at 3.80 ringgit to the dollar since 1998.<\/p>\n
A stimulus package, to be unveiled next month to shore up the
\neconomy, would be a shot-in-the-arm if it contained tax
\nincentives and other steps to boost competitiveness rather than
\njust government spending, he added.<\/p>\n
Bank Negara said GDP growth in 2003 would remain driven by the
\ndomestic economy but the private sector would assume a more
\nsignificant role.<\/p>\n
Private consumption growth is expected to jump to 6.9 percent
\nfrom 4.2 percent last year, but public consumption growth is seen
\nfalling to 3.1 percent from 13.8 percent. The expansion of public
\nspending is seen slowing to 4.1 percent from 4.6 percent.<\/p>\n
Manufacturing growth is expected to improve to five percent
\nfrom 4.5 percent last year, with agriculture growing 1.5 percent,
\nup from 0.3 percent.<\/p>\n
The central bank said there was a general consensus that the
\nelectronics sector would improve in the second half of the year
\nbut export growth was expected to ease to 7.8 percent, from 10.6
\npercent last year.<\/p>\n
Despite a recent hike in oil prices, Bank Negara said
\ninflation was expected to moderate to 1.5 percent from 1.8
\npercent last year and unemployment is projected at 3.4 percent.<\/p>",
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