KUALA LUMPUR: Malaysia's economy surged by 8% in the second quarter (Q2) of this year, beating all expectations, and prompting Banking Negara to say that growth for 2004 is expected to exceed the earlier target of 6% to 6.5%.
The Q2 was the highest growth since the third quarter of 2000.
The Q2 performance, together with the 7.6% growth in the first quarter meant that the average growth rate for the first half of the year was 7.8%.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said growth was driven by private sector demand and buoyant external demand.
“We expect the economy to grow in the second half of the year because of favourable economic conditions,” she told a media conference at Bank Negara yesterday.
Although growth for the second half of the year is expected to be less than the first, due to a high-base effect, Dr Zeti said that did not mean that the economy had peaked.
“There is still a steady underlying growth trend,” she said.
Driving the economy in Q2 were manufacturing and services, which grew by 12.1% and 7.4% respectively.
Higher tourist arrivals and a pick-up in domestic consumption led to a better performance by hotels, restaurants and retail trade.
The agricultural sector's output remained unchanged while that of the mining and construction sectors fell marginally.
Bank Negara said the construction sector is expected to benefit from the additional allocation of RM10bil under the Eighth Malaysia Plan.
The central bank believes that high oil prices will not be detrimental to Malaysia as the Government stood to gain between RM100mil and RM200mil from every US$1 (RM3.80) increase in the price of a barrel of crude oil after taking into account subsidies to keep petrol prices low.
“We are a net exporter of oil and are well positioned to absorb the impact of any changes,” Dr Zeti said.
The governor said interest rates were expected to remain low for “some time to come” or until inflationary pressure started to rise.
Inflation is expected to remain low, as manufacturers have responded to higher demand by pushing capacity upwards.
Dr Zeti expects global growth rates in the second half of the year to be more sustainable as the favourable economy is expected to reinforce domestic demand.
At a press conference after launching the Women’s Day celebrations at the Mandarin Oriental Hotel here, Prime Minister Datuk Seri Abdullah Ahmad Badawi expressed happiness over the country's robust growth.
He hoped the country could register an even better performance in the third and fourth quarters of the year.
“Hopefully, there will be no world economic crisis that can affect our economic growth,” he added.
Report from the Business section:Modest impact from high oil price
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