KUALA LUMPUR, May 28 – The government’s pessimism in cutting economic growth to -5 per cent for 2009 has surprised AmResearch, which maintains only a contraction of 2 per cent despite the bearish outlook.
The research house noted recent economic indicators - moderating pace of decline in exports; rising loan growth and power demand; and recovery in global chip sales, higher prices of crude oil and crude palm oil - point to significant improvements although there are weaknesses such as US housing data last March.
“We are taken aback by the swing in the government’s view from an optimistic just two months ago to a rather pessimistic one, especially at a time when lead indicators are stabilising,” senior economist Manokaran Mottain said in a note released by AmResearch.
He pointed out that if the Gross Domestic Product (GDP) were to be -5 per cent for whole year, the second-half of the year would still be weak, registering average contraction of 4 per cent based on the assumption of -6 per cent in the first half of 2009.
“Therefore, we are of the view that Bank Negara may be managing expectations on an extreme bearish outlook, with assumption of recent recovery signals as a temporary phenomenon - which could reverse in the coming months,” he added.
But Manokaran believes accumulated monetary policy initiatives and measures to enhance access to financing are sufficient to provide support to domestic demand apart from the the RM25 billion government guarantee fund easing concerns of access to financing by enterprises.
He said AmResearch was banking on the construction sector contributing to growth in the coming quarters, as evidenced by recent award of the tunnelling package of the Pahang-Selangor Raw Water Transfer project worth RM1.3 billion and tenders or the RM8 billion to RM10 billion Klang Valley LRT upgrade out by July, signalling an increase in the federal government’s pump priming programmes.
“In this regard, we are confident of improvements in the coming quarters and thus, maintain our forecast at -2.0% in 2009 for the moment - pending release of exports and IPI data for month of April,” Manokaran said.
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