Economic index points to stronger second-half growth, says RHB
KUALA LUMPUR, July 24 — Malaysia is likely to see stronger economic growth of 4.7 per cent in the second half of the year after moderating growth of 4.3 per cent in the first quarter, said RHB Research Institute following the release of May economic indicators.
The research house said the growth in the leading index, which provides an early signal of the direction that the economy is heading after two consecutive months of decline, suggested that the economy is likely to gradually improve in the months ahead.
RHB said that global uncertainties will likely gradually clear up in the later part of the year as long as the European Central Bank makes decisive moves to purchase bonds to stabilise the situation in Europe.
“This will likely lift the country’s export growth,” said RHB.
Prime Minister Datuk Seri Najib Razak said recently the eurozone debt crisis will not affect Malaysia although its major trading partners are bracing for tougher times.
The gloomy world economic outlook has had analysts predicting Malaysia will have its elections this year before getting the full impact of any crisis, as any downturn could affect support in the polls.
The Najib administration has been giving direct cash to various demographics to mitigate effects of any cost of living pressures. The prime minister also said direct cash payments could be a feature of future budgets.
RHB said that domestic fiscal spending was likely to taper off in the second half of the year but the effects will likely be cushioned by the implementation of the on-going entry point projects (EPPs) under the Economic Transformation Programme (ETP).
The Coincident Index (CI), which is used to monitor the most recent state of the economy, also declined by a smaller margin of 0.2 per cent month-on-month in May, after dropping by 1.9 per cent in April, thanks to a hike in the Industrial Production Index and smaller declines in employment and salaries of the manufacturing sector.
Real contributions in May however were stagnant and capacity utilisation in the manufacturing sector also stayed flat.
RHB said that this suggests that real GDP growth is likely to have slowed to 4.0 per cent year-on-year in the second quarter, after moderating to 4.7 per cent in the first quarter, on the back of a moderating consumer spending and slowing global economy.
The country’s lagging index, which tracks past economic activity, dropped to 0.7 per cent month-on-month in May, after rising by 1.3 per cent in April, and compared with 1.1 per cent in March largely due to a fall in the exports of natural gas and crude oil in May, and a decline of 0.5 per cent month-on-month in the number of investment projects.
RHB has forecast a full-year real GDP growth of 4.5 per cent this year compared with 5.1 per cent in 2011 and a faster pace of about five per cent in 2013.
Malaysia has said it needs six per cent growth every year now to achieve developed nation status by 2020.