Published May 15, 2009

Arab-Malaysian turns bullish on economy

Economist says worst is over, expects stronger final quarter

By S JAYASANKARAN
IN KUALA LUMPUR

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AN economist has suggested that although Malaysia is likely to see contracting growth this year, a 'worst case scenario' of minus 4-6 per cent has become irrelevant,

Ms Zeti: Central bank to revise its growth forecast for 2009 downwards

Manokaran Mottain, an economist with the Arab-Malaysian Banking Group in a report titled 'The worst is over', says: 'We are more bullish now than before. We expect a stronger final quarter recovery although we maintain our full-year gross domestic product estimate at minus 2 per cent.'

Malaysia's central bank seems to share the economist's views. Recently, governor Zeti Akhtar Aziz said that the central bank was looking to revise its official growth forecast for 2009 downwards from current forecast of 'flat' growth (between minus one per cent and one per cent).

An analyst who recently took his client to visit Bank Negara officials said that the central bank was loath to give details but seemed to indicate that first quarter growth was 'worse than expected'.

'It seems to me that they were saying that it could be like minus 4-5 per cent in the first quarter and it would be negative in the second as well,' he told BT. 'And the recovery would come slowly after that which is why it would be still negative for the full year.'

But the central bank and Mr Manokaran are pessimists compared to people like Tan Teng Boo, the managing director of fund management outfit icapital.biz who is so confident of a global V-shaped recovery that he opened fund management companies in three countries recently.

'Stock market worldwide bottomed out a few months ago,' said Mr Tan. 'And unlike what others say, this is not a bear market rally.'

Still, the jury is out on things like a V-shaped recovery. In a recent report, Schroders said that for developed countries, the recovery was still a story of 'case unproven'. But for emerging economies more insulated from developed market woes, growth has not been as badly affected and is showing 'signs' of recovery. 'For these countries it may not be just a case of things getting worse more slowly, but rather, things actually getting better,' Schroders noted.

Mr Manokaran seems to think so at least for Malaysia. He ticks off things like actual industrial expansion in China amid strong monetary growth there and lists a slower pace of export growth decline in Malaysia between January and March. Industrial production growth also registered a similar decline trend during the period.

Moreover, Mr Manokaran points at the 'positive' wealth effect of the stock market rally adding to domestic consumption. The capitalisation of Malaysia's stock market has risen 12 per cent to RM783 billion (S$323 billion). The government has also awarded RM5.6 billion worth of projects under its stimulus package. This, according to the economist, would lift domestic consumption.