PETALING JAYA: A 5.1% gross domestic product (GDP) growth in 2007 should be “just about right” for Malaysia and not too optimistic, said JP Morgan Emerging Asia Research managing director David Fernandez.
Fernandez said that a large part of the 2007 growth would be due to foreign and private investments.
In a teleconference from Hong Kong, he said: “The Government has been pushing to precipitate more private investments into the economy, especially after the launch of the Ninth Malaysia Plan.
“It has been good but more effort would be needed in 2007. Having said that, a 5.1% GDP growth is by no means disastrous.”
Bank overnight policy rates (OPR) should be maintained at 3.5% throughout next year, Fernandez said, as Bank Negara was comfortable with the current level as well as with the differential between its OPR and US Federal Reserve rates.
“We are also having a 3.50 forecast for the ringgit against the US dollar at end-2007. There are several Asian countries such as the Philippines, Thailand and South Korea whose central banks were considering corrective actions following the rise in their currencies against the dollar.
“Bank Negara, though, has been quiet and wants a more hands-off approach,” he said, adding that it would allow the ringgit to further appreciate gradually.
He said the 3.50 level for the ringgit would make the Malaysian equity scene and the Government long-term bonds more attractive, and the ringgit could be seeing more exposure with investors purchasing equities as well as fixed-income assets, besides engaging in straightforward foreign exchange trading.
On the Asian front, Fernandez said Asia ex-Japan could be looking at an overall GDP growth of 7% next year, with China leading the way at 9.5%. Hong Kong and Taiwan are forecast to register growth rates of 5% and 4.4% respectively.
“Despite their high growth rates, Asian countries are still growing below their potential. We are seeing consistent growth, no rapid policy changes and steady appreciation of Asian currencies over the next couple of years. Domestic demand should also increase,” he said.
Fernandez picked Indonesia, Thailand and Taiwan as countries with the potential to surprise the market in terms of 2007 GDP growth, tipping their GDP numbers to “accelerate” next year.
“As for China, we see a 10% appreciation on the cards for the renminbi. It will not be damaging to its export sector and we believe the Chinese government would not do anything that would hurt itself or other Asian economies.
“If the currency appreciation does not materialise, we could be seeing Chinese financial authorities having discussions about overheating in the economy,” he said.