‘Strong private sector behind robust economy’

Malaysia's economy remains strong and robust, Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz said yesterday, a view supported elsewhere by rating agency Moody’s Investor Service, which gave the country a “stable” outlook.


Zeti attributed Malaysia’s solid economy to a rigorous private sector that had kept demand and investment strong.

“We are confident that the gross domestic product growth in 2012 will be within the four per cent to five per cent range but we have to see what is happening in Europe.

“Of course, there is government investment of major projects taking place but particularly encouraging is private sector investment as it is the private sector that has been rigorous and
robust,” Zeti said at the release of the Labuan Financial Services Authority’s 2011 annual report here yesterday.

Moody’s, meanwhile, said Malaysia’s resilient growth, strong external position and deep and liquid domestic capital markets led to to the agency’s “stable” outlook on the country’s


A3 sovereign rating.

These factors assured favourable financing conditions, Moody’s said in a statement yesterday.

It stressed that Malaysia’s credit profile would be further enhanced by fiscal reforms that address weaknesses in both revenues and expenditures.

The rating agency noted that the Economic Transformation Programme (ETP) – a 10-year plan aimed at transforming the nation into a high-income one by 2020 – progressed well last
year and contributed more than expected to the country’s gross national income.

“But it remains to be seen if such a momentum can be sustained through the life of the programme. Implementation and political
risks are prominent, given the sensitivities surrounding
the reform of sectors, such as education and energy,” it said in the report.

It expects political pressures due to the impending parliamentary elections to be “reasonably managed”.

Meanwhile, Zeti said strong private sector activities would not only contribute to the growth in 2012 but also for the next few years.

“Yes, our exports have declined but we have priced that in our growth projections,” she said when asked on the stagnating exports growth in April and March.

Exports growth contracted by 0.1 per cent in April on the back of a 4.7 per cent GDP growth year-on-year in the first quarter.

Zeti said the growth momentum would be sustained in the second half.

"Consumption has been growing by six per cent to seven per cent and investment by more than 10 per cent; so that will be sustained going into the second half," Zeti said.

"Apart from continued access to financing, the Malaysian financial markets, backed by profitable banks, had remained orderly, providing opportunities to raise financing in the bond and capital markets,"

Malaysia has also improved its level of competitiveness and efficiency in the global business ladder. All eyes will be trained on Europe in the meantime and an outcome would be clearer within the next few days or weeks.

If it is positive, Malaysia can expect its growth range to remain unchanged.

Zeti said Asian financial markets were in a state of readiness to recognise the risks of a deep recession in Europe.

During the 2008/2009 economic crisis, Asian economies like Malaysia were able to bounce back to a rapid recovery, with Malaysia minimising the growth contraction to just over one per cent.

"Should it happen again, because of our degree of resilience, we will be able to emerge quickly after any setback ... because we do not have the kind of conditions prevailing in these crisis-affected countries," Zeti said.

She also said the current key benchmark interest rate level at three per cent remained supportive of growth with loans currently enjoying a 12 per cent expansion.