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Economic growth expected to remain weak in 2009

Posted on: April 1, 2009

Bernama – Wednesday, April 1

KUALA LUMPUR, March 31 (Bernama) — Malaysian economic growth is expected to be weak this year as recovery will not be on the horizon until the advanced economies of the United States and Europe recover early next year, according to an economist.

Paul Gruenwald, chief economist of Asian region, Australia and New Zealand Banking Group Ltd, said the Malaysian economy this year will most likely register a one percent growth, driven mainly from consumption.

“The stimulus plan by the government is timely and its focus on infrastructure is appropriate,” he said at a seminar on “The Economic Outlook for Malaysia and the Asian Region in 2009” organised by the Malaysia-Australia Business Council in collaboration with AmBank Group here today.

“Whether Malaysia needs another stimulus plan, there is a need to assess the success of the second stimulus package and what happens to growth,” he added.

Gruenwald said there was risk of a longer slowdown in the advanced economies of the US and Europe.

“The global recovery could gain some traction in the second half of this year. If this happens, then there is also a possibility that Malaysia’s economy could grow at two to three percent next year. However, for the first half of 2009, outlook will be weak with zero or negative growth,” he said.

According to Gruenwald, the return of foreign demand from advanced economies is critical to support growth in the global economy as China by itself is not able to restore global growth.

“Even if China is able to restore its growth to eight to nine percent, the benefit to the rest of Asia is likely to be limited as exports from the rest of the Asia to China appear equal to those to the US,” he said.

On the performance of the ringgit, Gruenwald said the ringgit and the other Asian currencies will experience weaknesses against the US dollar until the global economic crisis is resolved.

“The ringgit will be weak against the US dollar this year, with the possibility of 3.8 to the US dollar,” he said.

Gruenwald also said that Malaysia’s weak financial linkages with the rest of world helped to contain the banking channel from the global financial crisis.

“Inflation concerns in Malaysia have taken a backseat and price pressures have eased,” he said. — BERNAMA



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