Prediction: Growth to slow to 5% in 2007
Malaysiakini.com
Nov 30, 2006

Economic growth is likely to slow to 5.0 percent in 2007 from a projected 5.7 percent in 2006, the slowest pace in five years, Fitch Ratings said today.

The government has given a bullish picture on Malaysia's prospects recently, saying it expected growth to exceed its projection of 5.8 percent in 2006, and to reach 6.0 percent in 2007.

However, James McCormack, head of Fitch's Asia Sovereign Ratings said that while China's robust expansion will provide some regional support, Malaysia's greater dependence on the United States will likely hamper growth.

"The US is Malaysia's largest market, accounting for about 20 percent of exports, and the ability of exporters to adjust by focusing more on China is likely to be limited in the short term," McCormack said in a statement.

Fitch also forecast reductions in GDP growth rates elsewhere in Asia next year, including a slowdown to 4.0 percent from an earlier projection of 4.3 percent for Taiwan and 4.5 percent from 4.9 percent in South Korea.

Public finances

However, Fitch noted that even with a weaker export and GDP growth outlook, Malaysia's sovereign ratings were supported by ongoing current account surpluses and the country's net external creditor position.

The rating agency cited public finances as a more important constraint on Malaysian creditworthiness.

Malaysia is rolling out a series of projects worth RM100 billion under its five-year Ninth Malaysia Plan, a national development plan to boost the economy.

Malaysia's economy grew at a slower pace of 5.8 percent in the third quarter this year, from a revised 6.2 percent expansion in the previous quarter.

However, Bank Negara's governor Zeti Akhtar Aziz said last week that growth "could very well exceed" the 5.8 percent forecast for 2006 on the back of a robust economic environment.

Malaysia's economic growth hit 7.2 percent in 2004, but slowed to 5.2 percent in 2005.

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