BusinessTimes
MALAYSIA'S economic growth in 2008 is expected to surpass the six per cent forecast this year despite growing external uncertainties, says Public Bank Bhd.
"From the high and rising growth in the leading indicators, it is not unreasonable to expect a higher Gross Domestic Product (GDP) growth in 2008 compared with that of 2007," the bank said in its economic review for October.
To gauge the prospects of the economy in 2008, Public Bank used the Leading Index, a composite index consisting of several key economic variables provided by the Statistics Department.
These variables include money supply, Bursa Malaysia Industrial Index and total trade with major trading partners.
The Leading Index from January 2006 to June 2007 rose consistently from 138.5 (January 2006) to 153 (July 2007). In the first seven months of this year, it rose by four per cent from 147.1 in January to 153 (July).
"The increasing trend and higher growth of the Leading Index in 2007 indicates that the Malaysian economy will continue to remain strong and healthy in 2008," it said.
The outlook for 2008 is challenged by risks arising from high global oil prices, high global inflationary pressures and deceleration in the US economy while issues related to the crisis in the US sub-prime housing markets have yet to be resolved.
To gauge any signs of an economic slowdown, the bank used the Coincident Index to Lagging Index ratio to provide clues to the likely direction of the economy.
The increasing trend and steady growth in the Leading Index and the ratio of the Coincident Index to Lagging Index in 2007 indicates that the economy will continue to remain strong and healthy in 2008.
The average ratio of the Coincident Index to Lagging Index between January and July 2007 rose to 0.85 from 0.77.
"The high ratios indicate that the Malaysian economy will remain on an expansionary mode with GDP growth likely to be higher in 2008 than that of 2007," said Public Bank.
In the first half of this year, the economy recorded a 5.6 per cent growth, supported by a stronger pick-up in domestic demand. Private consumption was strong due to increases in income, strong and sustained prices for primary commodities and stable and low interest rates.
Public investment has risen as well with the implementation of high-impact development projects under the Ninth Malaysia Plan, while private investment was boosted partly by the higher capacity utilisation in the manufacturing sector.
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