Business

Saturday November 21, 2009

Zeti: Economy picked up at faster pace in Q3

By IZWAN IDRIS


KUALA LUMPUR: Malaysia joined the Asian recovery bandwagon, with the pace of its economic activities in the third quarter picking up at a faster pace than most had expected.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz told a press conference yesterday that there was a “high degree of confidence” that the economy would see positive growth in the last three months of the year.

For the third quarter to Sept 30, Malaysia’s gross domestic product (GDP) growth declined 1.2%, which was 5.7% better compared with the preceding quarter.

Tan Sri Dr Zeti Akhtar Aziz with Bank Negara top officals at a briefing to announce the third-quarter GDP data.

“This is stronger than what we were expecting. For now, the economy remains in a sweet spot,’’ Citigroup economist Kit Wei Zheng told Reuters yesterday.

Economists in a Reuters poll had forecast GDP would drop 2% after a 3.9% annual decline in the second quarter.

“Quarter-on-quarter, growth will probably ease off going forward but on an annual basis, we will see positive growth from the fourth quarter,” Kit added.

Domestic consumption was a main driver in the third quarter, with the private sector expanding 1.5% and public sector surged 10.9% largely due to Government’s increased spending under the two economic stimulus packages.

The construction sector grew 7.9% during the quarter, which was its fastest pace in years.

Zeti said a key factor that helped keep domestic spending intact was access to financing, which remained relatively easy in the country.

Total loans outstanding in the private sector rose to RM21bil in the third quarter from RM8.9bil recorded in the second quarter.

This reflected increased lending activities with higher loans disbursed to businesses and consumers, as confidence returned.

Improved confidence among investors also helped Malaysia record a net portfolio investment of RM8.8bil in the third quarter, the first positive figures since the first quarter of 2008.

The inflow also helped the ringgit strengthen 1.4% against the US dollar during the period under review and render it “generally stable” against other major currencies.

On a cash basis, gross inflows of foreign direct investment (FDI) moderated to RM6.2bil in the third quarter versus RM9.1bil in the second quarter.

Net FDI amounted to RM2.1bil (second quarter RM6.5bil).

In a separate announcement, the Statistics Department said the consumer price index (CPI) fell 1.6% in October compared with the same month last year.

At the press briefing, Zeti said Bank Negara expected inflation numbers to “turn positive in the coming months” largely due to the economic recovery.

She reiterated that current interest rates were supportive of economic growth and benign inflation outlook meant there was no medium-term risk for rates to be kept at current low levels.

Zeti said international economic and financial conditions continued to improve in the third quarter, economic activities in the advanced economies had stabilised and at the same time several regional economies had recorded positive growth.

“This positive trend is expected to continue going into 2010,’’ she said.

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