Think-tank cuts growth forecast to 4 percent
Published: Apr 17, 2001 1:42 AM | Updated: Jan 29, 2008 10:21 AM
(AFP) - An influential think-tank today cut its forecast for Malaysia's economic growth this year amid a worsening US slowdown.
The independent Malaysian Institute of Economic Research (MIER) said it reduced the gross domestic product growth forecast to 4.0 percent from 5.0 percent but was maintaining the 6.0 percent prediction for 2002.
MIER said the revision was based on the assumption that the US economic slowdown could get worse than expected, the highly uncertain external environment and the continuing weak Japanese economy.
"Europe seems to be the only region holding up somewhat," the institute said in a statement.
"Coupled with the downturn in the electronics cycle, the faltering external conditions will have an adverse effect on the Malaysian economy."
Not encouraging
MIER said the effects of the government's RM3 billion fiscal stimulus package might only be felt fully next year. Also, the "multiplier effect" generated from spending might not be as encouraging as expected given declining confidence.
Workers were likely to save rather than spend their extra cash following a two percent cut in compulsory payments to a state retirement fund.
MIER said confidence, a major factor affecting investments and consumption decisions, was weakening sharply.
Although income would continue to rise, private consumption would be affected by lower confidence and the downtrend in the stock market.
"We project private consumption to decelerate to a 6.5 percent growth in 2001 from 12.4 percent in 2000," MIER said.
With slower economic growth in the US and Japan, "we expect foreign direct investments to be less forthcoming despite higher approval figures by the Malaysian Industrial Development Authority."
Public spending to post good growth
MIER also said the softening economy and weakening confidence would affect local private investment, which was projected to expand at a slower pace of 8.4 percent compared to 26.7 percent last year.
Following the fiscal stimulus package, public spending was predicted to post good growth.
Overall, "we expect domestic demand to grow by 8.0 percent (2000: 14.6), contributing more to economic growth than net exports."
"The much slower economic growth in the US and Japan, coupled with the downturn in the electronics market, will adversely affect real exports, which are projected to record a 4.3 percent growth (2000: 16.3)."
The government has revised its GDP growth forecast for 2001 to 5-6 percent recently from 7.0 percent previously.
Economic Adviser Mustapa Mohamed said today the revised estimate "is achievable" given the additional pump-priming measures to counter slowing exports.
Almost 21 percent of all Malaysia's exports go to the United States.
The independent Malaysian Institute of Economic Research (MIER) said it reduced the gross domestic product growth forecast to 4.0 percent from 5.0 percent but was maintaining the 6.0 percent prediction for 2002.
MIER said the revision was based on the assumption that the US economic slowdown could get worse than expected, the highly uncertain external environment and the continuing weak Japanese economy.
"Europe seems to be the only region holding up somewhat," the institute said in a statement.
"Coupled with the downturn in the electronics cycle, the faltering external conditions will have an adverse effect on the Malaysian economy."
Not encouraging
MIER said the effects of the government's RM3 billion fiscal stimulus package might only be felt fully next year. Also, the "multiplier effect" generated from spending might not be as encouraging as expected given declining confidence.
Workers were likely to save rather than spend their extra cash following a two percent cut in compulsory payments to a state retirement fund.
MIER said confidence, a major factor affecting investments and consumption decisions, was weakening sharply.
Although income would continue to rise, private consumption would be affected by lower confidence and the downtrend in the stock market.
"We project private consumption to decelerate to a 6.5 percent growth in 2001 from 12.4 percent in 2000," MIER said.
With slower economic growth in the US and Japan, "we expect foreign direct investments to be less forthcoming despite higher approval figures by the Malaysian Industrial Development Authority."
Public spending to post good growth
MIER also said the softening economy and weakening confidence would affect local private investment, which was projected to expand at a slower pace of 8.4 percent compared to 26.7 percent last year.
Following the fiscal stimulus package, public spending was predicted to post good growth.
Overall, "we expect domestic demand to grow by 8.0 percent (2000: 14.6), contributing more to economic growth than net exports."
"The much slower economic growth in the US and Japan, coupled with the downturn in the electronics market, will adversely affect real exports, which are projected to record a 4.3 percent growth (2000: 16.3)."
The government has revised its GDP growth forecast for 2001 to 5-6 percent recently from 7.0 percent previously.
Economic Adviser Mustapa Mohamed said today the revised estimate "is achievable" given the additional pump-priming measures to counter slowing exports.
Almost 21 percent of all Malaysia's exports go to the United States.
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