Malaysia's Economy To Grow By A Slower 4.5 Per Cent This Year

KUALA LUMPUR (May 10, 2012): Malaysia''s economy is expected to grow by a slower 4.5 per cent this year due to weaker external demand, according to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

This is in comparison to the 5.1 per cent in 2011 from 7.2 per cent in 2010. ESCAP said the fiscal deficit remained at around 5.6 per cent of the Gross Domestic Product (GDP) in 2011 after declining from 7 per cent in 2009 to 5.6 per cent in 2010.

"This was largely due to wide ranging subsidies on the expenditure side and delayed introduction of the goods and services tax (GST)on the revenue side, which remains heavily reliant on oil revenue," it added.

International Centre for Education in Islamic Finance (ICEIF) Professor Emeritus Datuk Dr Mohamed Ariff Abdul Kareem said the local economy would be spurred by domestic demand. However, Mohamed Ariff said Malaysia’s budget deficit is a major concern.

"There are already signs that Malaysia''s credit rating is under pressure with the risk of downgrading.

"There is a need to rein in expenditure and increase tax revenue," he added, at the launch and briefing of ESCAP''s Economic and Social Survey of Asia and the Pacific 2012 here today. Mohamed Ariff said Malaysia''s fiscal deficit at above three per cent is a concern.

"The large deficit is attributed to wide-ranging subsidies (four per cent of GDP) and heavy reliance on oil revenue (40 per cent). "The saving grace is that debt is largely domestic (less vulnerable to external shocks). But a debt is a debt," he added.

Meanwhile, ESCAP Economic Affairs Officer Dr Oliver Paddison said the Asia-Pacific region will experience slowing growth in 2012 amidst global turbulence.

He attributed this to spillovers of the euro zone turmoil, global oil price hikes, excess liquidity and volatile capital flows. "The key long-term challenge is high and volatile commodity prices," he added, at a media briefing, on the ESCAP survey.

Paddison said growth is forecast to moderate to 6.5 per cent in 2012 from seven per cent in 2011 in the Asia Pacific region, with downward pressure from subdued developed economies.

"Despite the slowdown, the region remains an anchor of stability and growth pole for the world economy," he added.

He said a major concern is the insufficient job creation in formal sector in developing countries with a high young unemployment with the young three times more likely to be unemployed. -- BERNAMA