Malaysia - M'sian economy "won't grow over 5% this year"

KUALA LUMPUR: The global economic slowdown coupled with massive sell-offs across regional bourses have forced many countries to revise their growth forecasts.


Analysts have predicted the Malaysian economy would not grow more than five per cent this year.

The impending slowdown is weighing heavily on Prime Minister Najib Razak's plan to go for snap polls later this year.

With trade making up 220 per cent of the country's gross domestic product (GDP), Malaysia's export-reliant economy is taking a hit from sluggish demand in the US and Europe.

Several economists have downgraded the country's growth forecast this year to five per cent amid rising fears of a double-dip recession in the US.

RAM Holdings group chief economist Yeah Kim Leng said: "Malaysia is still vulnerable to slowdown in G3 economies. We do see fragile and very weak growth especially in the second half of this year.''

Inflation hit a two-year high in June at 3.5 per cent after the government increased fuel, energy and sugar prices to rein in a huge subsidy bill.

To cushion the rising cost of living, Prime Minister Najib has announced a series of handouts including a one-off bonus to all civil servants ahead of the month-end festive celebrations.

But with growth tapering off, analysts said prices may have peaked.

"Given that growth is weakening, prices are coming off, we do see inflation taking a back seat compared to sustaining growth,'' Dr Yeah said.

Still, the unfavourable external environment may prompt Mr Najib to put any election plans on hold.

Opinions so far are mixed on the timing for elections.

"It will be sooner rather than later, given the conditions from an economic perspective is still positive at least for the rest of the year," Dr Yeah said.

"The uncertainty next year will be the big question mark if the government were to postpone till next year."

Shah Alam member of parliament Khalid Samad said: "'The fact of the matter is that the longer they wait, we, Pakatan Rakyat, are just getting stronger so this is their problem. They are caught in the dilemma."

-CNA/wk
By Melissa Goh 


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