Saturday August 18, 2012
Mísia enjoying gravity-defying boom
PETALING JAYA: Malaysia’s economy is enjoying a gravity-defying boom that is confounding sceptics, said The Financial Times.
In an article by Jeremy Grant, the financial daily said this was due to big-ticket government spending, lending to business by well-capitalised banks, and robust consumer demand, fuelled by pay rises for civil servants and cash handouts that have even seen taxi drivers receive vouchers for free replacement tyres.
On Thursday, data announced by Bank Negara showed the economy grew by 5.4%, that was above consensus expectations of 4.6%, and the 4.9% recorded – after an upward revision – for the previous quarter.
It said Malaysia’s stock market had been among the best performers in the world, buoyed by big flotations including Felda, which was the second-largest initial public offering after Facebook when it raised over US$2bil last month.“Bankers are cashing in with a parade of further IPOs expected within months. Much of the impetus behind the growth comes from an “economic transformation programme” initiated by Prime Minister Datuk Seri Najib Tun Razak when he came to power in 2009.
This involves dozens of government-backed projects designed to boost per capita income to US$15,500 (RM48,550) by 2020, from US$9,600 last year and lift Malaysia out of its “middle-income trap,” Grant wrote.
According to him, Malaysia’s healthy economy – and the resulting “feel-good” factor – stands in contrast to growing anxiety among Malaysia’s neighbours in South-East Asia as the global downturn has tarnished their economies.
He wrote that “not only has Malaysia experienced strong domestic demand offsetting its vulnerability to weakening demand for its exports – much of them electronics destined for Europe; it has also benefited from deeper ties with economies in Asia.
The article also quoted Christian de Guzman, an analyst at Moody’s, a rating agency, who admitted he was sceptical about the programme’s ability to spur private sector development when it was launched. He wrote that De Guzman was more convinced now, adding that “The proof of the pudding is in the eating but so far they are on track. In aggregate there are just so many things going on (in the economy).”
Moody’s said that in 2006, the United States was Malaysia’s largest trading partner, absorbing 18.8% of its exports, while Asia-Pacific accounted for 60%. By last year the United States share had dwindled to 8.3% while Asia-Pacific jumped to 69%.
However, he wrote that analysts point out one nagging concern for Malaysia, which was the rising household debt, caused by the rapid growth in credit card usage.
Growth could yet be tripped up by domestic politics too. However, he wrote few are concerned about such uncertainty just yet, as the transformation programme takes root. The central bank is forecasting full-year growth is likely to be at the upper end of its 4% to 5% forecast.
Grant also quoted Rahul Bajoria, an analyst at Barclays saying that: “We expect momentum to remain underpinned as the project-based nature of these investments means that it is unlikely to be halted abruptly.”