MALAYSIA'S economy is projected to accelerate next year and grow between 5.5% and 6%, driven by higher exports and stronger domestic demand, primarily from the private sector, as the government's pro-growth fiscal and monetary measures start bearing fruit.
In the Economic Report 2003/2004 released by the Finance Ministry, the government has predicted a brighter outlook for the country in 2004 with all sectors of the economy expected to register higher growth, led by the manufacturing sector which will expand by 7.2% and the services sector by 5.5%.
The Economic Report 2003 said strengthened macroeconomic fundamentals and a more broadly balanced economic structure with emerging new sources of growth would provide the foundation for sustained higher growth in the country.
In line with the better economic prospects, Malaysia's per capita income is projected to increase by 4.3% to RM14,954 next year from RM14,343, while income in purchasing power parity terms would also rise to US$9,887 up 5.3% from US$9,390 this year, it said.
The report said a structural shift in the economy as Malaysia moved from being a developing to a developed nation would increasingly place the services sector as an engine of growth, fuelled by higher demand for transport, telecommunication, financial and insurance services.
The manufacturing sector would also register faster growth as it is driven by both a more buoyant external environment and a strengthening domestic economy.
Growth in export-oriented industries, in particular the electronics industry, is envisaged to gain strength following higher inter-regional trade, particularly between Asean and East Asia, it said.
Exports and imports have been projected to grow by 6.4% and 6.3% respectively on the back of an improved world growth and trade environment.
The agricultural sector, meanwhile, would be revitalised and emerge as the third engine of growth by growing 3% on the back of higher palm oil production.
The report said the private sector would resume its role as the driver of economic growth next year on the stronger pick-up anticipated in business confidence and consumer sentiment.
Domestically, the underlying strategic thrusts of macroeconomic management for 2004 are premised on a more dynamic and vibrant private sector supported by the enabling and conducive environment put in place through various measures over the years.
The government will continue to play the facilitative role in enhancing the effectiveness of the delivery system. For the private sector to lead the economy, efforts would be made to encourage private initiatives in new sources of growth, particularly in value creating activities in services and agriculture.
Measures would also be taken to develop and transform the agriculture and rural sector into a more dynamic income generating economic base.
It said that with an expected global economic recovery, domestic demand should be on the rise at a fairly strong rate of 4.7%.
Upbeat stock market activities across major bourses into the second half this year should bolster optimism for a firmer global economic recovery. The world economy is expected to post a higher growth of 4% next year, with the US registering growth of 3.6%, the euro area 2.3%, and Japan 1%.
Regional growth is expected to accelerate in 2004 given the containment of SARS and a positive impact following the implementation of various economic relief packages introduced by SARS-affected countries. China is expected to continue with its strong growth track to register 7.5% GDP.
Private sector expenditure is projected to rise 7.5% next year but public sector expenditure to drop 0.1%. while private investment will grow at 9.9%.
Consequently, private sector contribution to real GDP growth will increase by as much as 4.3% as against zero contribution by the public sector. The share of private investment to GDP is projected to increase to 10.5%, said the report.
More buoyant activities are expected for high value-added industries as well as information technology, telecommunications, transport and finance, it added.
The report said growth in private consumption expenditure would be more broad-based and is expected to register a respectably strong growth of 7% encouraged by higher disposable incomes, better job prospects and low interest rates.
Domestically, the underlying strategic thrusts of macroeconomic management for 2004 are premised on a more dynamic and vibrant private sector supported by the enabling and conducive environment put in place through various measures over the years. The government will continue to play the facilitative role in enhancing the effectiveness of the delivery system.
For the private sector to lead the economy, efforts would be made to encourage private initiatives in new sources of growth, particularly in value creating activities in services and agriculture.
Measures would also be taken to develop and transform the agriculture and rural sector into a more dynamic income generating economic base. And despite a reduction in the budget, expenditure for rural development is expected to double in 2004, including for roads, education, health, and basic amenities such as water and electricity.
In the trade sector, building upon its strength as the 17th largest trading nation in the world, efforts will be made to intensify the promotion and marketing of Malaysian products and brands.
With the focus on the creation of economic wealth, the social agenda towards a caring society will continue to be accorded due importance, particularly in elevating the standard of living and the quality of life of the poor, handicapped, aged and the less fortunate.
To balance the budget in the near term, the governments fiscal stance would be the deliberate tightening of public spending to rein in the deficit that had occurred over the last six years.
Total budgeted expenditure will be reduced by 1.1%, with a larger decline of 21.1% in the development expenditure.
The government's overall financial position is expected to be stronger, with deficit reined in from 5.4% to GDP in 2003 to 3.3% in 2004, and the consolidated public sector registering a surplus position.
The report said development expenditure would be prioritised towards the committed and approved projects under the mid-term review of the 8th Malaysian Plan, especially those with strong linkages and value creation potential in the economy.
In essence, the public sector presence in the economy will focus on sustaining public services and improving the delivery system while lending support to the development of a knowledge-based economy as a means to increase productivity and efficiency, and hence sovereign competitiveness.
And to support domestic economic activities, the monetary policy is expected to remain accommodative amid ample liquidity in the system and subdued inflation.
We're sorry, this article is unavailable at the moment. If you wish to read this article, kindly contact our Customer Service team at 1-300-88-7827. Thank you for your patience - we're bringing you a new and improved experience soon!
What do you think of this article?