ADB ups Malaysia's growth forecast

The Asian Development Bank (ADB) has revised Malaysia's gross domestic product (GDP) growth to 4.6 % this year from its previous forecast of 4.00%.

ADB in its Asian Development Outlook 2012 Update released in Hong Kong yesterday attributed the upward revision to the stronger-than-anticipated domestic demand in the first half year.

However, for 2013, the bank projects a 4.8% growth instead of the earlier forecast of 5% due to the "more subdued outlook in global recovery."

The bank, however, expects growth to ease in the second half of the year from the 5.1 % growth in the first half year due to worsening external environment.

ADB said private consumption will be supported by a vibrant labour market, low inflation, and transfer payments while incomes will get a boost from a scheduled increase in the minimum wage next year., which is expected to affect some 25% of the workforce.(The Malaysian Government had passed a legislation in July to enforce a minimum wage of RM900 (US$300) per month for Peninsular Malaysia and RM800 for Sabah and Sarawak, effective January 2013).

The report also noted that investments under the Economic Transformation Programme (ETP) are being stepped up, including a US$11.5 billion mass rapid transit rail (MRT) system in Kuala Lumpur, the largest infrastructure project to-date in the country as well as significant urban redevelopment in the capital.

Other on-going projects include the construction of the second bridge to Penang costing over US$1 billion and a US$550 million oil and gas terminal in Sabah.

Malaysia's services sector, which contributes some 60 % to the GDP, will benefit from strong growth expected in both consumption and investment.

Communications, business services, financial and real estate services, retailing, and restaurants are expected to post good results during the forecast period.

In property development, approvals for housing have also doubled in the first six months of the year compared with the same period last year, a reflection that the construction sector will also be robust during the forecast period.

The drop in prices for agricultural export commodities will affect rural incomes, however the bank expects this to be mitigated by cash transfers.

Meanwhile, ADB has revised downwards the growth forecast for developing Asia to 6.7% in 2013 from the earlier projection of 7.1%, noting that the region must be ready to face a longer than expected moderate expansion amidst an ongoing slowdown in global demand.

Source: NST Business Times and ADB website