KL trade balance to improve

KL trade balance to improve

KUALA LUMPUR (AFP): Malaysia's trade balance is expected to
improve in 1996 allowing the government to shift concern to
inflation-control, analysts said yesterday, ahead of the release
of December trade data.

"1995 was bad but we can say the worst is over for Malaysia,
with December showing a surplus," said Yeoh Keat Seng, director
of Crosby Research in Kuala Lumpur.

The government is expected to focus attention on inflation-
control in 1996 after having grappled with the burgeoning trade
and current account deficit in 1995, Yeoh said.

Analysts widely predicted a trade surplus of more than 500
million ringgit (US$200 million) for December when announced by
Deputy Prime Minister Anwar Ibrahim, who is also finance
minister.

The Finance Ministry's secretary-general Clifford Herbert said
Tuesday Anwar would announce the trade statistics this week and
that "there is nothing to be alarmed about."

The current account position is also well within our control,
Herbert added.

Foreign analysts and fund managers, who have been concerned
with Malaysia's wide current account deficit, were keenly
awaiting the release of December trade data to gauge Malaysia's
economic health.

Talk of better trade figures since last week has fueled a
rally on the Malaysian bourse, with the composite index, the key
market barometer, surging 17.49 points to a new 16-month high
Tuesday to 1,124.39.

Analysts said the trade deficit for the whole of 1995 was
expected to be 9. 3 billion ringgit, much lower than the
Treasury's own forecast of 9.6 billion ringgit and better than
earlier predictions by private economists.

This would also improve the forecast for Malaysia's
problematic current account deficit to 17.5 billion ringgit
against the Treasury's projection of 18.2 billion ringgit for
1995, analysts said.

In 1994, Malaysia saw a trade deficit of 2.2 billion ringgit
and a current account deficit of 11 billion ringgit.

"In 1996, we expect to see a further improvement of the trade
deficit to 2. 5 billion ringgit and a narrowing of the current
account deficit to 15 billion ringgit," an analyst with a foreign
research house said.

Inflation-control is expected to be the main focus this year
as the multiplier effect coming through consumers in the wake of
higher tariffs for telephone services, power and highway toll
could put pressure on prices, analysts said.

The sharp growth in loans last year of above 20 percent amid
the continued robust economic growth that has averaged above
eight percent since 1987 will further fuel inflation, they said.

The government is expected to allow domestic interest rates to
rise by another 75-to-100 basis points by the year-end from the
current average of 7. 20 percent, they said.