World Bank expects 5.1% growth for Malaysian economy

The Malaysian economy is expected to achieve a solid growth of 5.1 % this year as well as next year, supported by robust consumer and business spending, says the World Bank in its latest Malaysia Economic Monitor which was unveiled in Kuala Lumpur, yesterday.

The World Bank's 2013 growth forecast is within the official projection of a gross domestic product (GDP) growth of between 5%-6% this year.

The bank has also taken note that there is still substantial value addition of investments expected this year. Investment growth has led to more imports of capital goods and construction services.

Expecting a faster recovery in the global economy next year, the World Bank expects the external sector to increase its contribution to growth, which would help to lessen the impact of tighter fiscal policies on the Malaysian economy, which could lead to a deceleration in domestic demand, World Bank Senior Economist Frederico Gil Sander said at the launch of the report yesterday.

The World Bank said the slower growth in the first quarter of the year was mainly due to slowing external demand, uneven economic recovery in developed economies and a slower growth in China, an important market for Malaysia's exports.

The World Bank noted that the Malaysian Government was able to achieve its fiscal deficit target for 2012 as a result of higher-than-targeted revenues, lower development expenditures and a higher-than-expected GDP figure, despite significant expenditure overruns.

In the report, the bank said Malaysia is among the few developing countries that has successfully converted its abundant natural resources into long-term sustainable growth.

The country's sound policies have also ensured revenues from resource extraction were reinvested in the economy in the form of machines, buildings and education, which in turn supported high rates of growth."Malaysia is a good example of a country that has successfully used natural resources to invest in other areas of the economy,"which has allowed the country to promote diversification, create jobs and improve living standards for its people," Annette Dixon, World Bank Country Director for Malaysia, who was also present at the launch, said in the bank's press statement on the release of the report.

Noting that Malaysia is expected to continue to rationalise its subsidy policy, Sander said that speeding up the implementation of productivity-enhancing reforms, particularly those related to skills, would enhance performance of the non-commodity sectors and the longer-term outlook for the economy.

Adapted from NST Business Times and World Bank's press release