KUALA LUMPUR: Malaysian Institute of Economic Research (Mier) has revised upward its forecast of the country's gross domestic product (GDP) to 5.6% this year, from 5.2% previously.
The Government had projected this year's GDP growth at 6%, up from 5.9% last year.
Executive director Prof Dr Mohamed Ariff attributed the slight revision to mitigating factors such as lower oil price, relatively lower inflation rate and the Government's new policies that could potentially raise growth slightly.
“We expect the slowdown to be more pronounced in the first half (of the year), with a pickup subsequently in the second half, but ending overall with 5.6%.
“(Due to) lower oil prices - bad news for Government's revenue but good for the economy - further liberalisation move adopted by the Government and some sectors such as property that is likely to do better, we expect the economy to perform better, hence our revision,” he told reporters after a presentation at Mier 12th Corporate Economic Briefing yesterday.
The Government recently removed limits on onshore foreign exchange (forex) transactions and relaxed the limit on forex accounts and foreign borrowing.
It also introduced unprecedented measures to woo foreign investors, such as exemption from the Foreign Investment Committee rules and freedom to hire foreign workers, which were applicable to the Iskandar Development Region.
As a highly trade-dependent economy, Malaysia will be affected by the slower growth in the US economy, despite having closer trade ties with East Asia lately.
“Our estimate will be below the Government's 6% target and lower than last year's growth because we think that the slowdown in the US will have a relatively greater negative impact on Malaysia.
“The fiscal spending can only offer a partial cushion against the external weakness,” Ariff added.
In its report, Mier said recent monthly indicators up to February had been volatile due to shorter working days during the festive period. The negative growth in output and exports should revert to trend growth in the coming months.
The leading index was rising cautiously, suggesting the Malaysian economy would continue to expand moderately. Greater foreign interests had led to a rally in the stock market, consequently strengthening the ringgit at the same time, it added.
The inflation rate had moderated to 3.1% in February from a high of 4.8% in March 2006.