Malaysia expects economic growth even if war breaks out

Malaysia expects economic growth even if war breaks out

Associated Press Kuala Lumpur

Malaysia posted strong trade figures Tuesday and the central bank chief predicted that economy would still grow strongly even if a war breaks out between the United States and Iraq.

Imports and exports rose strongly in August, bringing a trade surplus of 4.57 billion ringgit (US$1.2 billion) compared to 4.05 billion ringgit ($1.06 billion) in July, preliminary data released by the trade ministry showed.

Zeti Akhtar Aziz, governor of the central bank, told Dow Jones Newswires in an interview in Washington that second-half growth in gross domestic product would exceed the annual rate of 3.8 percent in the second quarter.

"The second half of this year should be better than the first half and I expect the growth rate to be at least 4 percent for the whole year," said Zeti, who was attending the annual IMF- World Bank meeting.

Malaysia's robust economy and steady growth in neighboring Asian countries made Zeti relatively sanguine about potential adverse impacts stemming from any full-scale U.S. attack against Iraq.

Since Malaysia is a net exporter of oil, a rise in oil prices, which many expect would be the immediate impact of a U.S.-Iraqi war, wouldn't affect the country, Zeti said.

The war would be a drag on the global economy as a whole, she agreed.

But Malaysia's and its neighboring Asian countries' high degree of reliance on each other for economic growth have given the region "a higher degree of resilience" and made it "better insulated," Zeti said.

The government recently revised its growth forecast higher, from 3.5 percent to between 4 percent and 5 percent. In its world economic outlook released last week, the International Monetary Fund forecast 3.5 percent growth in Malaysia this year.

Zeti said that the bank had the "flexibility" to ease monetary policy if economic impact from the war proved unexpectedly large. The central bank has kept its key interest rate at 5 percent since its last cut, after the Sept. 11 terror attacks.