Published November 19, 2009

M'sia's Q3 growth seen down 2%

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(KUALA LUMPUR) Malaysia's economic slide looks set to have bottomed out in the third quarter with economists saying gross domestic product probably contracted 2 per cent from a year ago, a Reuters poll showed.

Malaysia, Asia's third-most trade-dependent country, is still feeling the brunt of uncertain demand from the United States and Europe due to the global financial crisis although some economists say that improved private consumption should offset the drag in trade when third-quarter figures are announced tomorrow.

September's exports fell 24.2 per cent on an annual basis with exports to the US down 35.2 per cent from a year ago.

'What it will start showing is an improvement in private consumption. Consumer confidence has shot higher,' said HSBC economist, Robert Prior-Wandesforde.

The economy shrank by a smaller- than-expected 3.9 per cent in the second quarter, thanks in part to fiscal pump-priming by the government, prompting the central bank to revise growth figures upwards.

The poll of 15 economists also showed that Malaysia's central bank would hold rates at 2 per cent until there was firm evidence of an economic recovery. The central bank's last policy meeting of the year will be held next Tuesday.

'Inflation is not a concern. There is no domestic source of inflation. Everyone cut rates early in 2008 but Bank Negara cut only at the tail-end of the year so it will probably hike rates much later than everyone else,' said Standard Chartered economist Alvin Liew.

The central bank has held rates steady at 2 per cent for five consecutive policy meetings this year. -- Reuters