Export slump may hit Malaysia growth in 2012, says ADB

(The Malaysian Insider) – The Asian Development Bank (ADB) has forecast growth of 4.7 per cent for Malaysia next year, down slightly from 4.8 per cent in 2011, due to a potential slump in exports to the advanced economies of US and Europe.

The bank said in its report on Asia macroeconomic development released today that while US economic growth could strengthen somewhat, the euro zone will likely fall into either a brief recession or a more severe long-term downturn.

In its assessment of country vulnerabilities, the bank noted that Malaysia’s fiscal deficit of over five per cent of GDP last year was higher than several other regional economies such as Thailand (two per cent), Singapore (0.1 per cent) and Indonesia (0.7 per cent).

Only Cambodia (six per cent), Brunei (eight per cent) and Vietnam (eight per cent) had higher fiscal deficit ratios.

Malaysian government officials have maintained GDP growth projections of between five and six per cent for next year thanks partly to the implementation of projects identified in the Economic Transformation Programme and strong commodity prices which will boost spending in rural areas.

Most research houses, however, expect Malaysia to grow between three and five per cent.

The World Bank said last month that Malaysia’s economy is expected to slow further in the remainder of 2011 and into early 2012 mainly due to a deterioration in the outlook for external demand and expects a growth of 4.9 per cent next year.

The International Monetary Fund (IMF) in its September report had forecast a growth of 5.2 per cent this year and 5.1 per cent in 2012 for Malaysia.

Malaysia’s third quarter growth surpassed expectations to grow at 5.8 per cent thanks to robust domestic demand.

A global economic slowdown may also hit oil prices, a commodity which Malaysia relies heavily on.