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
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
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
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
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
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
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