Analysts upbeat about Malaysia's economy
Analysts upbeat about Malaysia's economy
By M. Jegathesan
KUALA LUMPUR (AFP): Malaysia's economy has slowed to a
healthier pace, according to the government's 1996 economic data,
but analysts warned Sunday inflation and a weak trade balance
were still major concerns.
"Fears of an overheating economy have dissipated," said
Desmond Ch'ng, economist with South Johor Securities, a local
broking firm.
But Ch'ng said inflationary pressures continued to persist.
The sharp slow down in the construction sector to 9 percent last
year from a robust 15 percent in 1995 was also a point of
concern, he said, reacting to economic data released at the
weekend.
Deputy Prime Minister Anwar Ibrahim said last Saturday
Malaysia's growth slowed to a healthier and more stable pace of
8.2 percent last year, after a sizzling 9.5 percent growth in
1995.
Inflation rose to 3.5 percent last year from 3.4 percent in
1995. Anwar, who is also finance minister, said the slower
economic growth had helped shrink the country's current account
deficit to a more manageable 11 billion ringgit (4.4 billion
ringgit) from a hefty 18.7 billion ringgit in 1995.
The 1996 data revealed that the economy is "healthier" than in
1995 with economic growth kept at a more manageable pace, Ch'ng
said.
Other analysts were generally upbeat about Malaysia's economy,
but warned that the government should not be complacent as
concerns over rising inflation and a weak trade balance remained.
"Inflation was curtailed at 3.5 percent last year, but the
real life situation for the lower income group could be higher.
The price of basic food items like fish is rising," said Ramon
Navaratnam, a former treasury official turned corporate figure.
The 8.2 percent growth rate last year had, nevertheless, put
to rest fears that the Malaysian economy was beginning to
decline, said Navaratnam, who is group corporate adviser to
property group Sungei Way Group.
"I do not believe the stable growth rate happened
unexpectedly. Policies were adopted to address the balance of
payments problem," he added.
He said since late 1995, the government had discreetly slowed
down its spending on mega projects to "cool the economy".
"Putrajaya, the new federal administrative township project is
not moving that fast... the project is phased over a longer
period," Navaratnam said.
Navaratnam suggested that the federal government find ways to
make the states provide more land for food production so that
prices of basic food items could remain stable.
"The private sector has to be given incentives to indulge is
food cultivation so that the import bill for food could be
reduced," he added.
South Johor's Ch'ng predicted the trade deficit may widen in
1997 as imports of capital goods would continue to be high. With
imports expected to outpace exports, the trade deficit would
remain high and put pressure on the current account.
The current account could widen to 13 billion ringgit this
year, from 11 billion ringgit last year, Desmond said,
forecasting growth to be sustained at 8.2 percent this year.
The economy has been growing at above 8 percent a year since
1987.
"The outlook for 1997 is bright. We will enjoy the 10th year
of sustainable economic growth but we cannot rest on our laurels
as lingering concerns persist," Desmond said.