Published January 6, 2009

Growth may miss KL govt forecast: analysts

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(KUALA LUMPUR) Malaysia's economic growth will probably miss the government's forecast this year because of a deepening global recession, lower commodity prices and slower trade with China, analysts at Aseambankers Malaysia Bhd said.

Expansion in South-east Asia's third-largest economy may slow to 1.5 per cent, Aseambankers said in a report yesterday, cutting an earlier estimate that matched the government target of 3.5 per cent.

Growth was probably at least 5 per cent in 2008, the government predicted in November.

Malaysia's US$181 billion economy expanded at the slowest pace in three years in the third quarter of 2008, industrial production fell for a second month in October, and prices of crude and palm oil, the nation's largest commodity exports, have tumbled.

The world may be barely halfway through the current crisis, according to Aseambankers.

'The global economy is going further into the tunnel,' said the Kuala Lumpur-based bank in its report.

'The storm is far from over. The most obvious route where the global financial turmoil and economic downturn is hurting Malaysia is the export channel,' it added.

Malaysia in November cut interest rates for the first time since 2003 and announced a RM7 billion (S$2.95 billion) spending package after the government lowered its 2009 economic growth forecast to 3.5 per cent.

That would be the slowest expansion in eight years.

The economy grew 4.7 per cent in the three months ended Sept 30.

According to Aseambankers, expansion will slow to 0.7 per cent in the first half of 2009, before rising to 2.4 per cent in the following six months as stimulus measures and interest- rate cuts take effect.

Malaysian Prime Minister Abdullah Ahmad Badawi said on Dec 31 that the government may introduce more stimulus measures to boost consumer spending and shield the economy from the global recession. -- Bloomberg