Strong domestic demand will fuel Malaysia's growth

Spill-over effects from the implementation of the
Economic Transformation Programme entry point projects will also drive
the country into a growth trajectory, say analysts



KUALA LUMPUR: Malaysia's economy could face bigger challenges
next year due to the adverse effects of the global economic slowdown but
continuous domestic investment, coupled with strong domestic demand,
are expected to lend support to the country's growth, analysts said.

Apart
from that, spill-over effects from the implementation of the Economic
Transformation Programme entry point projects will also drive the
country into a growth trajectory, they said.

RAM Holdings Bhd
group chief economist Dr Yeah Kim Leng said domestic demand-led growth
and increased regional trade and investment will be among the key areas
that would help generate growth for the Asian country.

"In the
case of Malaysia next year, we do expect, although we think that there
will be some knock-on effects as a result of a slower external demand, I
think the momentum generated by our rising private consumption and
domestic investments can help insulate the economy from the adverse
effects of the global slowdown," he told Bernama in an interview
recently.





Since 2001, the greater shift towards domestic-led demand and gradual
shift away from the G3 market (the US, Europe and Japan) towards
intra-regional demand for export, have helped Malaysia to reduce its
dependency on the advanced economies, he said.

Yeah said the
country's exports to the US accounts for about eight to nine per cent
of total exports while exports to Asian countries accounted for slightly
more than 50 per cent.

According to Moody's Analytics, Malaysia,
as well as other commodity producers like Indonesia, Australia and New
Zealand, fared better this year in terms of domestic economic growth due
to continued demand for agricultural products and industrial metals.

Despite
Asia being the focus of global growth this year, inflation remained the
main challenge in the first half of 2011 as central banks continued
monetary tightening, before a regional slowdown prompted a shift towards
policy easing in the second half, said the international credit rating
agency.

Meanwhile, Asia was reportedly to increase its share of
the world's gross domestic product (GDP) from the current 25 per cent to
35 per cent by 2020 while G3's share will likely fall from 48 per cent
to 38 per cent.

On the local front, Prime Minister Datuk Seri
Najib Razak recently said the country will maintain a projection of five
per cent growth for the economy this year and next year barring
"something catastrophic".

In the third quarter of this year,
Malaysia's economy expanded 5.8 per cent compared with 5.3 per cent in
the same quarter last year, due to stronger domestic demand. Bernama