KL economic growth to slow down: MIER

KL economic growth to slow down: MIER

Agence France-Presse Kuala Lumpur

The Malaysian Institute of Economic Research (MIER) on Tuesday cut its 2003 economic growth forecast for Malaysia due to a fall in tourists following the outbreak of SARS.

MIER executive director Mohamed Ariff said it reduced its growth forecast for Malaysia to 3.7 percent from an earlier projection of 5.7 percent.

SARS has had an adverse impact on tourism, an industry which has helped boost the country's economy in the past few years, he was cited as saying by the official Bernama news agency. Tourism is Malaysia's second largest foreign exchange earner after manufacturing.

Malaysia has frozen visas for visitors from China, Taiwan, Vietnam and Canada to curb the spread of the SARS virus.

On Monday, ING Financial Markets trimmed its 2003 forecast for Malaysia to 4.0 percent from 5.0 percent due to the outbreak of the deadly Severe Acute Respiratory Syndrome (SARS).

Azrul Azwar, an economist at MIDF Sisma Securities recently said that tourism arrivals would drop to 12.9 million this year from 13.3 million in 2002.

"This is a drop from our initial forecast of 13.56 million tourists for 2003," he said.

As the country's second largest foreign exchange earner, the dip in visitors would badly affect the economy, he added.

Ariff said the threat of SARS posed a more serious threat to growth than the Iraq war.

The 3.7 percent forecast was realistic and achievable taking into consideration a stimulus package to be announced by the government soon, he said.

But Ariff said the new forecast for Malaysia was based on the assumption there would be no U.S. reprisal on Malaysia's war stance and that the SARS epidemic would subside.

Government officials say the stimulus package aimed to bolster the economy was expected to be announced in May.

MIER also revised downward its 2004 economic forecast to 5.4 percent from 6.3 percent amid global uncertainties.

The central Bank Negara Malaysia, in its 2002 annual report, warned gross domestic product (GDP) growth could slide even lower if global economic uncertainties persist.

Bank Negara governor Zeti Akhtar Aziz said the new forecast, up slightly from 4.2 percent growth recorded last year, was in line with expectations in other Asian economies for the pace of growth last year to be sustained into 2003.