HSBC cuts 2012 GDP forecast to 3.7pc

HSBC has reduced its 2012 gross domestic product forecast for Malaysia
to 3.7 per cent from five per cent due to slower global growth which
will continue to dampen exports.

HSBC said it, however, expected
the domestic demand to hold up relatively well, supported by a solid
employment outlook and monetary and fiscal stimulus as well as more
projects would commence under the Economic Transformation Programme, and
help to shore up the economic growth.

It said the global cooling
should help reduce inflationary pressure by slowing growth and reining
in international commodity price inflation.

"Hence, we expect
inflation in Malaysia to moderate, although there are upside risks to
food inflation owing to the floods in Thailand and the potential farm
labour shortages caused by crackdown on illegal workers," it said.

The bank said given the weaker global economic conditions, Bank Negara Malaysia has started to sound more dovish of late.

"We
expect it to take action during the first half of 2012 and embark on a
'mini' easing cycle before guiding rates back up again the following
year," it said.

HSBC said the government's target deficit
reduction this year of 4.7 per cent from an estimated 5.4 per cent for
2011 may prove difficult to achieve, given the downside risks to growth
and oil prices. - Bernama