Economists’ outlook for 2013 broadly in line with BNM

Picture for illustration purpose. Taken from www.mole.my

KUCHING: Economists have largely concurred with Bank Negara Malaysia (BNM) which is cautiously optimistic on Malaysia’s future outlook given the considerable global economic downside risks and the central bank’s forecast of sustained economic growth of five to six per cent for 2013.

RAM Holdings Bhd (RAM) group chief economist Dr Yeah Kim Leng told The Borneo Post via telephone that his outlook on the country’s economy was broadly in line with that of the central bank, with a gross domestic product (GDP) growth forecast of 5.3 per cent for this year.

Dr Yeah Kim Leng

“Domestic demand momentum coupled with the improving external environment (the US, Japan and China) should lend support for Malaysian export growth which was relatively flat last year.

“The overall short term conditions are favourable to sustain the growth trajectory,” he summarised while noting that price pressure might increase in the second half of the year and the sharp rise in household debt to GDP was manageable but should be monitored.

On the divestments of government linked companies (GLCs) as guided in the Economic Transformation Programme Annual Report 2012, Yeah saw the move as being positive as it would add liquidity and dynamism to the private sector.

Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz released BNM’s Annual Report 2012 on Wednesday giving a positive outline on the nation’s growth trajectory going forward.

Tan Sri Dr Zeti Akhtar Aziz

The GDP forecast was also in line with RHB Research Institute Sdn Bhd (RHB Research) economist Peck Boon Soon’s expectation but slightly more optimistic than the Ministry of Finance’s projection of 4.5 to 5.5 per cent predicted in September 2012.

“The central bank expects inflation to average two to three per cent in 2013 and indicates that the focus of monetary policy in 2013 will be on managing the risk of rising consumer prices while supporting sustained domestic economic growth.

“In addition, consideration will be given towards avoiding the build-up of financial imbalances including the excessive build-up of household debt.

“We expect the central bank to keep its overnight policy rate (OPR) unchanged at three per cent in 2013. Risk to the OPR, however, is on the upside if the global economic recovery turns up to be stronger than expected,” the economist opined in a comprehensive report yesterday.

Peck expected inflationary pressure to build up gradually in 2013, on account of a rise in international food prices that would likely spill over to higher food prices in the country.

The implementation of the minimum wage policy in the private sector, which came into effect on January 1, would likely put further pressure on prices, he opined.

Meanwhile, the economics team at Kenanga Investment Bank Bhd’s research division (Kenanga Research) opined that it was no surprise that BNM forecast the GDP to grow at five to six  per cent as “it may have taken into account the external risk as well as the uncertainty pertaining to the outcome of the general election (GE)”.

“Despite the amount of uncertainty and hurdles faced by major economies for much of 2012, BNM appears confident that the strength of the domestic economy, aided by the aptly timed Economic Transformation Programme would help pull the economy through in 2013.

“On that same note, we maintain our GDP forecast at 5.3 per cent,” the team revealed while adding that it ‘pretty much’ shared BNM’s outlook on the global economy this year.

Kenanga Research team highlighted that BNM was looking at continued strength of the domestic economy, leaning on momentum from 2012’s growth trajectory.

Though there might be external risks, BNM seemed quite confident that Malaysia would be able to ‘ride out the wave’ just as it had last year, the team stated.