Malaysia’s GDP to grow 5.8% this year, says UN body

KUALA LUMPUR: Malaysia’s economic growth is expected to grow at a slower pace of 5.8% in 2008 after making gains in 2007 to 6.3% due to higher private consumption and fixed gross investment, a United Nations body said on Friday.

The UN Economic and Social Commission for Asia and the Pacific (Escap) said the main factor for the anticipated slowdown in the economy is the slowing in the electronic export market

“The main drag on Malaysia’s exports has been the weaker demand for semi-conductors and other electric products in the United States market,” Escap said in a report “Economic and Social Survey of Asia and the Pacific” released on Friday.

On the inflation outlook, ESCAP said it was expected to rise to 2.8% in 2008 after dipping in 2007 to 2%.

On Wednesday, Bank Negara Malaysia said it expected the economy to grow between 5% and 6% this year and inflation was expected to rise to 2.5%-3% this year from 2% last year.

Escap said Malaysia’s economic growth in 2007 was based on strong domestic demand which more than compensated for a downturn in export growth to 2.1% in 2007 from 7.4% a year earlier.

Private consumption grew by 10.7% in 2007 from 7.1% in 2006, while investment spending rose by 9.5% in 2007 from 7.9% a year earlier. “Overall, the growth rate of domestic demand increased to 9.7% from 7.0% in 2006,” Escap said in its survey report.

On the inflation rate in 2007, the UN body said this was a result of a 5% appreciation of the ringgit against the US dollar that put downward pressure on import prices. Local interest rates have remained stable.

Malaysia remained a target for direct investment. This increased to US$8.6bil (RM27.5bil) in 2007, up from US$6.1bil in 2006, while outward direct investment climbed to US$9.7bil from US$6bil a year ago. The outflow of funds also eased pressure on the ringgit’s appreciating in value.