Country Report Malaysia December 2008

Outlook for 2009-10

• Political uncertainty and instability are unlikely to dissipate in the months ahead, despite an expected orderly transfer of power from the prime minister, Abdullah Badawi, to the deputy prime minister, Najib Razak, in March 2009.
• The leader of the opposition alliance, Anwar Ibrahim, will continue with his campaign to destabilise the ruling Barisan Nasional (BN) government by persuading BN legislators to switch to the opposition.
• The Economist Intelligence Unit expects the BN coalition to remain in power in the forecast period. The BN still has a sufficiently large majority to pass the bulk of new legislation unchallenged.
• We expect real GDP to grow by just 1.5% in 2009, reflecting Malaysia's exposure to the global economic slowdown. We expect world trade to shrink by 0.5% in 2009.
• Inflation is forecast to moderate markedly in 2009-10, from an estimated average of 5.7% in 2008. Domestic demand growth will be sluggish, and global prices for oil and industrial raw materials will fall sharply in 2009.
• The merchandise trade surplus will fall to US$22.9bn in 2009, from an estimated US$35.3bn in 2008. The current-account surplus will also shrink in the next two years.

Monthly review

• The slow pace of judicial reforms has led to growing concerns in the past month that the next prime minister of Malaysia will clamp down on critics and members of the opposition.
• Bank Negara Malaysia (BNM, the central bank) reduced the overnight policy rate by 25 basis points on November 24th to 3.25%, the first reduction since 2003.
• The government unveiled a package of fiscal stimulus measures in early November. It also revised its economic forecasts for 2009.
• Malaysia's economy grew by 4.7% year on year in the third quarter of 2008, a marked slowdown compared with the second quarter, when the economy grew by 6.7%.
• The annual rate of inflation fell below 8% for the first time in three months in October. Inflation, as measured by the consumer price index, increased by 7.6% year on year in October.
• Merchandise exports grew by 15.1% year on year in September, bolstered by still high global prices for oil, palm oil and liquefied natural gas. But prices for all three commodities have declined sharply during the fourth quarter.

Source: Country Report

This report covers the following industry codes:
SIC Code: 59;10;15;39
NAICS Code: 44;212;23;31