Malaysia - Malaysia think tank downgrades growth outlook

A leading think tank has downgraded its economic growth forecast for Malaysia for this year and 2012, citing concern that Europe's financial crisis could hit the country's trade-focused economy.

The Malaysian Institute of Economic Research (MIER) revised its estimate for 2011 growth to 4.6 percent, down from an earlier 5.2 percent projection, it said in an announcement on its website Thursday.

The revised estimate is lower than the government's official forecast of between 5.0 and 5.5 percent growth in 2011, which it reiterated last week in a budget submitted to parliament.

Meanwhile, MIER adjusted its earlier prediction for 2012 to 5.0 percent, down from 5.5 percent.

"The global economic outlook remains fluid and increasingly worrying," MIER's revised forecast said.

"Further deterioration in the economic and financial environment in the eurozone will likely weaken the US further, with repercussions for international trade."

Malaysia's economy grew 4.0 percent in the second quarter, its slowest pace in nearly two years, on softening global export demand. Official third-quarter figures have not yet been released.

The economy grew 7.2 percent in 2010.

The government said last week that exports, the engine of Malaysia's economy, rose 10.9 percent in August, which analysts said might help ease fears of a slowdown in overseas orders.

But MIER was less optimistic, saying the eurozone's troubles were likely to further weaken economic activity in key markets such as Europe and the United States.

"Economic growth momentum will probably moderate from (the second half of 2011) onwards, arising from a weaker exports outlook," it said.

Malaysia depends heavily on exports of key commodities such as palm oil, liquefied natural gas, and chemicals, as well as manufactured goods like electronics.

AFP

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