By Anuradha Raghu and Lilian Loh

KUALA LUMPUR, Feb 18 (Reuters) - Malaysia's economy probably

accelerated in the fourth quarter as the government ramped up

spending and investment rose ahead of impending general

elections, helping to offset weak exports, a Reuters poll

showed.

The election, which must be called by end-April, will be

closely fought, a prospect which is already rattling financial

markets, although the ruling Barisan Nasional (BN) coalition is

still widely expected to win.

BN, which has been in government since 1957, suffered its

worst election result in 2008, losing its two-third

parliamentary majority for the first time. To shore up support,

the government has held off unpopular cuts to food and fuel

subsidies and increased handouts to poor voters in the past

year.

Gross domestic product in the fourth quarter

likely expanded 5.5 percent from a year earlier, picking up from

a 5.2 percent growth rate seen in the third quarter, according

to a median forecast of 16 economists polled by Reuters. The

forecasts ranged from 4.3 to 6.4 percent.

The economists also predicted full-year growth rose to 5.3

percent in 2012, versus 5.1 percent in 2011, highlighting the

resiliency of many Southeast Asian economies as strong domestic

consumption offset sagging global demand.

On a quarter-on-quarter basis, GDP possibly increased a

seasonally adjusted 2.2 percent in the Oct-Dec period from the

previous three months, according to the median forecast of six

economists.

Exports, which normally account for about 60 percent of

Malaysia's economy, fell 2 percent year-on-year in the fourth

quarter, the same pace of decline in the third quarter.

Total exports for the year were a mere 0.6 percent higher

than in 2011. Shipments in December fell to a surprising

three-year low, reflecting patchy demand from its key overseas

markets.

Still, economic activity was buoyed by government handouts

and supportive monetary conditions, said Chua Hak Bin, an

economist with Bank of America Merrill Lynch.

'Growth will be led by strong investment growth, spurred by

infrastructure projects, and healthy consumer spending,' Chua

said in an email from Singapore.

Economists also noted that Malaysia's manufacturing sector

remained resilient, with industrial production annual growth

higher in the fourth quarter against the third quarter despite

weakness in exports.

Many economists expect Malaysia's export outlook to improve

only in the second half of the year, requiring a strong recovery

in commodity prices and global demand especially for its

electrical and electronic products, which make up one-third of

total exports.

On the other hand, investment activity will probably

continue in the first half of the year, although the upcoming

general election has added an element of risk, especially given

Prime Minister Najib Razak's plans for economic reform.

Najib is also closely associated with the $444 billion

Economic Transformation Programme that aims to lift Malaysia to

developed status by 2020 through public and private investments.

'There's uncertainty about the elections and continuity of

government policies, given that one of the key drivers of

Malaysian growth has been the ETP and the strategic reform

initiatives,' said Santitarn Sathirathai, an economist with

Credit Suisse in Singapore.

'Naturally it will make businesses and investors alike a bit

more nervous about what is going to happen if there is at all

any change,' he added.

Malaysia's central bank kept interest rates on hold for the

tenth consecutive time at its Jan. 31 meeting, saying then that

it expected 'robust economic expansion in the fourth quarter'.

Inflation in January likely held at 1.2 percent from a year

earlier, hovering near three-year lows, but price pressures are

expected to pick-up after the election.

Forecasts for Q4 2012 GDP, full year 2012 GDP (percentage

change year-on-year and quarter-on-quarter):

FORECASTS 4Q 2012 GDP 2012 GDP 4Q 2012 GDP

(pct y/y) (pct y/y) (pct q/q)

Median 5.5 5.3 2.2

High 6.4 5.6 6.5

Low 4.3 5.0 1.3

3Q 2012 GDP 5.2 - -

2011 GDP - 5.1 -

No. of respondents 16 16 6

ANZ 6.1 5.5 -

BA Merrill Lynch 5.3 5.3 -

Citigroup 5.8 5.5 3.3

Credit Suisse 6.4 5.6 2.4

DBS 5.0 5.2 -

HSBC 5.4 5.3 1.3

ING 5.5 5.3 2.0

JP Morgan 5.5 5.3 6.5

Kenanga 4.3 5.0 -

Maybank 5.8 5.5 2.0

MIDF 5.8 5.3 -

Nomura 5.5 5.4 -

OCBC 5.0 5.1 -

RAM Economics 5.5 5.4 -

Standard Chartered 4.3 5.0 -

TA Securities 5.5 5.4 -

(Editing by Kim Coghill)

Keywords: MALAYSIA ECONOMY/GROWTH

(anuradha.raghu@thomsonreuters.com)(+603 2333 8040)(Reuters Messaging: anuradha.raghu.thomsonreuters.com@thomsonreuters.net)

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