KUALA LUMPUR, May 10 — Malaysia is looking at slower growth as regional economies take a hit from the deterioration of the global economic environment particularly in Europe, the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said today.
The agency projected a growth rate for Malaysia of 4.5 per cent this year compared with 5.1 per cent last
year and 7.2 per cent in 2010.
The slower growth could present a hurdle for Malaysia’s ambitions to reach high-income status by 2020 as this could be the second consecutive year that growth will come in below the six per cent average growth prescribed by the Najib administration’s reform initiatives such as the New Economic Model (NEM) and Economic Transformation Programme (ETP).
The Asia-Pacific as a whole meanwhile is expected to see its growth moderate further to 6.5 per cent in 2012 compared with 7 per cent in 2011 due to a slackening of demand for exports in advanced economies.
ESCAP noted that the Malaysia continued to incur fiscal deficits, although reduced, due to wide-ranging subsidies and the delayed introduction of the broad-based goods and services tax (GST).
Prof Datuk Mohamed Ariff Abdul Kareem, professor with the Global University of Islamic Finance, said that growth this year was expected to be driven by private consumption and commodity exports.
“Expect public expenditure to decline over deficit concerns,” he said at the launch of the ESCAP Economic and Social Survey 2012.
He noted that the US used to be Malaysia’s top trading partner but was now only the fifth largest during the first two months of the year while Singapore was now the country’s top trading partner and China had climbed from 14th to second place.
As part of reforms, subsidy spending was to have been rationalised but the exercise was suspended indefinitely last year over concerns it would increase inflationary pressure.
ESCAP noted that while subsidies for sugar and energy were reduced slightly in 2010, subsidies still accounted for about four per cent of GDP.
ESCAP economic affairs officer Oliver Paddison said countries in the region needed to rebalance their economies towards domestic consumption and strengthen regional co-operation to face economic challenges.
He added that high commodity prices had become a “new normal” and countries should get involved in a “green revolution” to boost food production to help bring down inflation in food prices.
ESCAP said the world had entered a second stage of the global financial crisis with a sharp deterioration in the economic conditions largely due to the Eurozone debt crisis and the uncertain US economy.
It estimated that a disorderly sovereign debt default in Europe or the breakup of the euro common currency region would result in a new crisis that could lead to a total export loss of US$390 billion (RM1,170 billion) over 2012-2013 and reduce Asia-Pacific growth by 1.3 per cent.
The agency noted however that despite the slowdown, the Asia-Pacific will remain the fastest growing region in the world and has begun acting as a growth pole for other developing regions such as South America and Africa.
The agency projected a growth rate for Malaysia of 4.5 per cent this year compared with 5.1 per cent last
Mohamed
Ariff said growth in Malaysia this year is expected to be driven by
private consumption and commodity exports. — Picture by Choo Choy May
The slower growth could present a hurdle for Malaysia’s ambitions to reach high-income status by 2020 as this could be the second consecutive year that growth will come in below the six per cent average growth prescribed by the Najib administration’s reform initiatives such as the New Economic Model (NEM) and Economic Transformation Programme (ETP).
The Asia-Pacific as a whole meanwhile is expected to see its growth moderate further to 6.5 per cent in 2012 compared with 7 per cent in 2011 due to a slackening of demand for exports in advanced economies.
ESCAP noted that the Malaysia continued to incur fiscal deficits, although reduced, due to wide-ranging subsidies and the delayed introduction of the broad-based goods and services tax (GST).
Prof Datuk Mohamed Ariff Abdul Kareem, professor with the Global University of Islamic Finance, said that growth this year was expected to be driven by private consumption and commodity exports.
“Expect public expenditure to decline over deficit concerns,” he said at the launch of the ESCAP Economic and Social Survey 2012.
He noted that the US used to be Malaysia’s top trading partner but was now only the fifth largest during the first two months of the year while Singapore was now the country’s top trading partner and China had climbed from 14th to second place.
As part of reforms, subsidy spending was to have been rationalised but the exercise was suspended indefinitely last year over concerns it would increase inflationary pressure.
ESCAP noted that while subsidies for sugar and energy were reduced slightly in 2010, subsidies still accounted for about four per cent of GDP.
ESCAP economic affairs officer Oliver Paddison said countries in the region needed to rebalance their economies towards domestic consumption and strengthen regional co-operation to face economic challenges.
He added that high commodity prices had become a “new normal” and countries should get involved in a “green revolution” to boost food production to help bring down inflation in food prices.
ESCAP said the world had entered a second stage of the global financial crisis with a sharp deterioration in the economic conditions largely due to the Eurozone debt crisis and the uncertain US economy.
It estimated that a disorderly sovereign debt default in Europe or the breakup of the euro common currency region would result in a new crisis that could lead to a total export loss of US$390 billion (RM1,170 billion) over 2012-2013 and reduce Asia-Pacific growth by 1.3 per cent.
The agency noted however that despite the slowdown, the Asia-Pacific will remain the fastest growing region in the world and has begun acting as a growth pole for other developing regions such as South America and Africa.
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