Country Report Malaysia October 2009

Outlook for 2010-11

• Political tussles between the ruling Barisan Nasional (BN) coalition and the main opposition Pakatan Rakyat (PR) will remain fierce as both sides strive to increase their representation in the national and state parliaments.
• The Economist Intelligence Unit expects the BN to remain in power in 2010-11. 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 in a trial that is scheduled to resume in late 2009.
• We expect the economy to stage a recovery in 2010, expanding by a forecast 3.9%, after an estimated contraction of 2.4% in real GDP in 2009. The recovery is expected to continue in 2011, when GDP is forecast to grow by 3.8%.
• Following a period of mild deflation in the second half of 2009, consumer price pressures are expected to build gradually during 2010 as domestic demand strengthens and global commodity prices stay on an upward trend.
• A pick-up in global trade as well as stronger domestic demand will lead to a slight deterioration in the trade balance, but Malaysia will continue to post significant surpluses on the trade and current accounts in 2010-11.

Monthly review

• A by-election was held for the Penang state assembly seat of Permatang Pasir in August. The seat was retained by the opposition Parti Islam se-Malaysia, albeit with a smaller majority than in the March 2008 general election.
• The Malaysian Chinese Association, the second-largest party in the BN coalition, has called an extraordinary general meeting to decide the future of a former deputy president who is entangled in a feud with the party president.
• Elections to senior party posts in the Malaysian Indian Congress, a junior partner in the BN, were held in September. The party's leader, whose post was not up for election, affirmed his determination to serve until 2012.
• There have been no new policy initiatives in the last month, but the government's response to an annual review conducted by the IMF, published in August, has offered an insight into past and future policy formulation.
• GDP data for the second quarter of 2009 point to further signs of stabilisation: the rate of contraction slowed to 3.9% year on year, from 6.2% in the first quarter. More importantly, the economy grew by 4.8% quarter on quarter.
• Malaysia continued to experience mild deflation in August, when consumer prices fell by 2.4% year on year.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;49;60;80;48
NAICS Code: 336;22;52;62;517