Malaysia Cuts GDP Forecast as Nation Nears Recession
Malaysia’s government said the economy may shrink as much as 5 percent this year, slashing its forecast as the nation nears its first recession in a decade.
This year’s contraction will range from 4 percent to 5 percent, Prime Minister Najib Razak said in Putrajaya, outside Kuala Lumpur today. In March, he said the economy would shrink 1 percent at worst or grow the same amount. A recovery may start in the fourth quarter, he said today.
Malaysia’s economy shrank more than analysts expected in the first quarter as exports slumped, central bank data showed yesterday. Najib is relying on a 60 billion-ringgit ($17 billion), two-year stimulus package that includes infrastructure projects and loan guarantees to revive growth.
“The question remains if domestic consumption, which has been a key growth driver for the past few years, will deteriorate further in the next few quarters,” Alvin Liew, an economist at Standard Chartered Bank in Singapore, said in a report today.
Southeast Asia’s third-largest economy contracted 6.2 percent in the first quarter from a year earlier, after a 0.1 percent gain in the previous three months, the central bank said yesterday payday loans for bad credit. Economists expected a 3.9 percent decline.
Domestic demand dropped 2.9 percent as businesses and households reined in spending, and the services industry, about half of Malaysia’s economy, shrank 0.1 percent.
‘Real Surprise’
“The real surprise for me was the lack of growth in services and consumer spending,” said Suhaimi Ilias, an economist at Maybank Investment Bank Bhd. in Kuala Lumpur. “I was expecting the two to still register low single-digit growth.”
Asia’s export-dependent economies from Japan to Singapore have shrunk as the deepest global recession since the Great Depression saps demand for Intel Corp. computer chips and IOI Corp. palm oil produced in the region.
Still, Malaysia’s central bank kept its key interest rate unchanged at 2 percent this week, saying previous cuts and government stimulus measures will contribute to a recovery later this year.
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