KUALA LUMPUR, July 20 — Malaysian Rating Corporation Berhad (Marc) is considering a potential downgrade of its Malaysia GDP growth forecast if the Industrial Production Index (IPI) turns negative in the second quarter and the US fails to raise its debt ceiling in August, increasing the risk of a default by the world’s largest economy.

“If there is another negative figure for the IPI in June and the US cannot raise its debt ceiling, then we cannot rule out downgrading Malaysia’s GDP forecast for 2011 of 5.3 per cent,” said Marc chief economist Nor Zahidi Alias today.

He added that second quarter GDP growth could also be lower than expected due to the disruptions arising from the tsunami in Japan, with growth possibly coming in at between 3.5 per cent and four per cent instead of the earlier forecast of 4.6 per cent.

US President Barack Obama and the Republican Party are currently under increasing pressure to reach an agreement on raising the national debt ceiling by August 2 to avoid risks of a debt default.

Nor Zahidi added that the worse case scenario arising from a US failure to raise its debt ceiling is the negative effect on investor sentiment.

He added, however, that he thinks US officials would try to avoid another round of credit crunch.

Malaysia suffered a 5.1 per cent decrease in the IPI in May, the largest drop since September 2009 and worse than market expectations of 3.1 per cent, thanks to tsunami-related disruptions to the global supply chain.

Neighbouring Singapore, meanwhile, grew at its slowest pace in two years during the second quarter, registering a GDP expansion of near zero due to global demand weakness leading to a slump in manufacturing.