KUALA LUMPUR: The central bank foresees an upside potential to its gross domestic growth (GDP) forecast of 4.5% to 5.5% for the country this year boosted by new initiatives and further improvements in the global economy.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said factors contributing to a potential upside in the country’s GDP growth forecast was a better than projected international environment, new economic initiatives and the Government’s transformation programme which could raise the level of efficiency and productivity.
“Indicators also point to a better economic performance in the first quarter of the year versus the fourth quarter (of 2009).
“We have higher loans growth in the first quarter. We continue to have positive export performance and a number of other indicators that point to a better performance in the first quarter,” Zeti told a media briefing yesterday in conjunction with the release of the central bank’s annual report.
Zeti said new measures to be announced under the New Economic Model on March 30 would be supportive of overall private sector investment including foreign direct investments.
RAM Holdings Bhd group chief economist Dr Yeah Kim Leng agreed that there was upside potential to the central bank’s GDP forecast.
“The Malaysian economy will beat current expectations given the stronger than expected global and domestic recovery,” he said.
However, he cautioned that growth may be affected in the second half of the year due to the fragility of the advanced economies.
According to the Bank Negara 2009 annual report, the forecast GDP growth of 4.5% to 5.5% this year is underpinned by strengthening domestic demand and an improving external environment.
It is also based on the expectation of a gradual and uneven global economic recovery.
The services sector is projected to register a higher growth of 4.9% in 2010 and will remain the key contributor to overall GDP growth.
The manufacturing sector is poised for strong growth of 6.5% this year, based on the observed momentum of recovery since the end of 2009.
Broadbased expansion is expected across all clusters, reflecting improved external demand and strengthening domestic demand.
Zeti said the Government had put in place various measures towards improving its fiscal position in particular its current operating budget.
“However, there are still the remaining projects and part of the stimulus package that are still to be implemented.
“The Government will announce its strategies for further consolidation but it will improve its fiscal position during the course of 2010,” she said.
On the outlook for the ringgit, Zeti said the appreciation of the currency reflected the strengthing of the country’s underlying fundamentals and orderly foreign exchange market.
“We are not a country that targets any level for our exchange rate. What we want to provide is good market conditions that will facilitate trade and investment activities,” she said.
On a global bond sale by the country, Zeti said the central bank encouraged the issuance of sukuks.
“We have already seen two very successful foreign currency issuances and this would be an important issuance if the Government does so because it would form a benchmark for future private sector issuance of the bond market,” she said.
Zeti also highlighted areas of focus for the financial sector this year which included a blueprint to develop a strong and stable financial sector.
The central bank will also have a comprehensive review of existing legislations to ensure an effective and efficient legislative framework as well as the transition to an enhanced deposit guarantee scheme.
“We will exit the arrangement (deposit guarantee scheme) in a coordinated manner together with Hong Kong and Singapore.
“We are close to announcing our revised scheme. It will be well before year-end,” Zeti said.
The central bank’s financial position remained strong in 2009 with total assets growing RM18.5bil to RM363bil with international reserves of RM331.3bil.
Net profit generated was RM7.7bil for the year.
Bank Negara Annual Report 2009
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