KUALA LUMPUR, Feb 14 — Malaysia's export-driven economy has begun to slow as the European debt crisis cuts demand, Bloomberg reported today.
The international business wire said the crisis, which sees Greece teetering on the edge of default, dragged Malaysia's gross domestic product (GDP) growth down to 4.8 per cent in the last quarter of 2011.
"Malaysian economic growth probably cooled as the European debt crisis hurt exports, dragging full-year expansion to the slowest since the global recession and putting pressure on the central bank to keep interest rates low," it reported today.
The Q4 2011 growth is slower compared with 5.8 per cent in the previous quarter. Bloomberg's survey of 18 economists also found that Southeast Asia's third-largest economy probably grew by 5 per cent last year, down from 7.2 per cent in 2010.
“Malaysia, being amongst the most open economies in the Asia-Pacific region, still remains vulnerable to the worsening global economic environment,” the financial newswire quoted Cynthia Kalasopatan, an economist at IdeaGlobal in Singapore, as saying.
“We believe that Bank Negara Malaysia will likely maintain a stand-still stance but has the leeway to cut rates if the global situation worsens.”
It also quoted Irvin Seah, an economist at DBS Group Holdings Ltd. In Singapore as saying that “external headwinds have picked up strongly in the fourth quarter of last year.”
“Real export growth is unlikely to pick up significantly until a more pronounced improvement in global outlook materialises," he added.
The ringgit, the best performing currency in Asia this year after the Indian rupee, has gained more than 4 percent against the dollar.
A slowdown across Asia has seen other economies such as Japan and Singapore report contractions last quarter with the latter estimating a 4.9 per cent retreat.
Datuk Seri Najib Razak, who has announced plans to raise civil servants’ pay and boost spending on railways and roads to spur growth, expects the RM720 billion economy to expand between 5 to 6 per cent this year, higher than most analyst projections.
Economists expect the slump in Q4 2011 will continue into 2012, with most projecting growth to be under four per cent.
The danger of a default by Greece and softening demand from the United States and China is expected to dampen Malaysia's export-driven economy.
The government has repeatedly expressed confidence that the national economy will expand by at least five per cent in 2012, in line with the annual growth target set out in its Economic Transformation Programme (ETP).
Prime Minister Najib has targeted an average annual growth of six per cent for Malaysia to achieve developed nation status by 2020.
