KL expects better balance of payments

KL expects better balance of payments

KUALA LUMPUR (AFP): Prime Minister Mahathir Mohamad said that Malaysia's current account deficit could improve next year without any deceleration in growth.

"What we need to do is to increase our exports and reduce our imports," Mahathir was reported saying by Bernama news agency.

Malaysia would not have to reduce its robust growth to reduce its balance of payments, Mahathir said, maintaining that the government forecast of 9.6 percent growth this year could be achieved.

The finance ministry had projected growth to slow to 8.5 percent next year.

But Mahathir said: "We are targeting for high growth even for next year," adding that measures taken by the government to improve its balance of payments were "waiting to show results."

"For example, we want to export more but if we don't produce more, how can we export more ... to produce more takes time, Mahathir said.

Malaysia's high current account deficit, which is projected to widen to 19.1 billion ringgit (US$7.64 billion) next year, higher than the government forecast of 17.06 billion ringgit, had raised concern among foreign fund managers over the economy.

The government itself has predicted this year's current account deficit at a wider-than-expected 18.14 billion ringgit from 11 billion ringgit last year.

But officials have repeatedly assured investors that the deficit was due to rising imports to sustain the country's racing economy, which has experienced eight straight years of annual growth surpassing eight percent.

Mahathir said the government had decided that the country should not import unnecessarily.

Meanwhile, the statistic department said that Malaysia's external trade deficit from January to September widened to 8.2 billion ringgit (US$3.3 billion) from 1.5 billion ringgit a year earlier due to purchases of aircraft and ships.

It said in its September trade report that the high deficit was due to imports growing at a faster pace of 26.9 percent over a 21.2 percent expansion in exports during the period.

In September alone, however, the trade shortfall improved to 254.2 million ringgit, compared with 1.1 billion ringgit in the preceding month, and 474.8 million ringgit in September 1994.

The department said total imports during the nine-month period surged to 143 billion ringgit from 112.7 billion ringgit a year earlier, while exports grew to 134.8 billion ringgit from 111.2 billion ringgit.

The purchase of 13 commercial aircraft costing 2.4 billion ringgit and nine cargo ships, including a liquefied natural gas carrier at a combined value of 1.2 billion ringgit, contributed to the higher deficit, it said.