Country Report Malaysia June 2009

Outlook for 2009-10

• Attempts by both the ruling Barisan Nasional (BN) coalition and the Pakatan Rakyat (PR) opposition to increase their representation in national and state parliaments will ensure that the political scene remains fluid in 2009-10.
• The Economist Intelligence Unit expects the BN to remain in power in 2009-10. The ruling coalition still has a sufficiently large parliamentary majority to pass the bulk of new legislation unchallenged.
• There is a risk of mass demonstrations if the leader of the PR, Anwar Ibrahim, is found guilty of sodomy at a trial in July.
• The Malaysian economy will contract by 3% in 2009, as exports of goods and services fall by 18.8%the steepest decline in exports on record. The economy will return to growth in 2010, but will expand by just 1.2% in that year.
• Malaysia is expected to experience mild deflation in 2009 as domestic demand weakens and global prices for oil and industrial raw materials fall sharply.
• The merchandise trade surplus will fall in 2009-10. Although the current-account surplus is also expected to contract over the next two years, it will remain sizeable.

Monthly review

• In May a high court called for the reinstatement of the incumbent chief minister of Perak, Mohammad Nizar Jamaluddin, but the BN has launched an appeal on the grounds that its candidate is the rightful chief minister.
• The government unveiled major liberalisation measures in April. Their main objective is to attract foreign investment in order to help increase the contribution of the services sector to GDP.
• The most significant of the liberalisation measures announced in April is the elimination of a local-equity requirement that favours ethnic Malays in parts of the services sector.
• Plans to liberalise the financial sector were also announced in April. Equity requirements for commercial banks have not been removed, but there are plans to issue new banking licences in the next three years.
• The latest data on industrial output point to a moderation of the recent downward trend. Although output fell by 14.4% year on year in March, month-on-month comparisons showed growth.
• Consumer price inflation continued to moderate in March, with the annual rate of inflation dropping to 3.5%, from 3.7% in February.

This report covers the following industry codes:
SIC Code: 70;65;60
NAICS Code: 72;53;52