Published September 25, 2009

Current interest rate level appropriate: KL

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(KUALA LUMPUR) Malaysia's central bank said the country's interest rates are 'appropriate' as government stimulus and improving overseas demand help the economy recover from the global slump.
Dr Zeti: External demand will improve in this quarter; GDP will expand in the next three months

The current interest rate level 'is supporting the demand for access to financing', central bank governor Zeti Akhtar Aziz told reporters in Kuala Lumpur yesterday. 'Going forward, unless there are any significant changes, this rate remains the appropriate rate.'

Bank Negara Malaysia, which has cut its key rate from 3.5 per cent in mid- November to 2 per cent to spur growth, has become more confident that the South-east Asian nation is recovering from its recession, Credit Suisse Group said on Wednesday, citing deputy governor Ooi Sang Kuang. Trade Minister Mustapa Mohamed said yesterday exports will resume growth next quarter.

'We've seen the worst,' Dr Zeti said, predicting an improvement in external demand this quarter and an expansion in gross domestic product (GDP) in the next three months. 'At the initial stage we expect growth will be modest and as we go into next year it will improve more significantly.'

Malaysia will revise its growth forecast in the 2010 budget, to be tabled in parliament next month, Dr Zeti said.

The government, which usually gives an updated forecast for the current year's GDP and unveils its first estimate for the coming year in the annual budget, expects the economy to shrink as much as 5 per cent in 2009.

The country's export and manufacturing slump has abated as economies from Singapore to China emerge from the world's deepest recession since the Great Depression. Overseas sales fell 22.8 per cent in July from a year earlier, easing from a 29.7 per cent drop in May.

Malaysia's electrical and electronics industry is getting more orders and some companies are considering hiring more workers, Mr Mustapa told reporters in Kuala Lumpur yesterday.

'Their orders have gone up,' he said. 'This is a good sign but it's not immediate.'

Malaysia's economic contraction eased to 3.9 per cent last quarter from a 6.2 per cent decline in the first three months of the year.

The central bank kept interest rates unchanged for a fourth straight meeting last month. -- Bloomberg