Malaysia's GDP to grow 5.9pc in 2008: World Bank

BANGKOK: The World Bank says the outlook for the Malaysian economy in 2008 is more positive with a 5.9 per cent growth rate but feels the prospects also depend largely on how significantly economic conditions in the US worsen in the coming months.It says the sub-prime crisis appears to have had a limited effect on the Malaysian financial sector so far, although its impact on export performance could be more significant over time.The World Bank’s latest East Asia & Pacific Update shows that Malaysia’s real GDP (gross domestic product) growth in 2007 is expected to moderate to 5.7 per cent, after growing 5.9 per cent in 2006.“Although export performance has so far been weak in 2007, domestic demand should help to sustain growth. Strong private consumption is likely, given favourable consumer sentiments, low inflation, high commodity prices, stable interest rates and a recent pay hike for government officials,” World Bank says.Similarly, an expansionary fiscal policy, following the Budget 2008 announced in September, should also strengthen growth, it adds.The Update, a six-monthly report on the region’s economic and social health, finds that growth in emerging East Asia is expected to exceed eight per cent in 2007 for a second year in a row and to moderate only slightly in 2008, despite growing concerns about the US sub-prime crisis and increasing global oil prices.Among the East Asian countries, China is expected to grow by 11.3 per cent in 2007 before slowing modestly to 10.8 per cent in 2008 while Vietnam is to grow by 8.2 per cent next year compared to 8.3 per cent this year.Cambodia is likely to achieve 8.0 per cent growth in 2008, Laos 7.9 per cent, Indonesia 6.4 per cent, the Philippines 6.2 per cent and Thailand 4.6 per cent.Although East Asian exports to the US have already slowed, more buoyant investment and consumption in China and other countries have allowed growth to remain strong and even pick up this year, says the World Bank.The report finds that for the first time, the number of poor people living below US$2 a day in East Asia has fallen below 500 million, down from one billion in 1990.The Update cautions that new highs for oil prices will test the solidity of the East Asian and global economic expansions in 2008, stating that an average oil price of US$90 in 2008 will be associated with an income loss in East Asia of a little over one per cent of GDP.The report’s lead author, Milan Brahmbhatt, says: “The impact of the US sub-prime crisis and the renewed surge in oil prices have clearly increased downside risks.“Nevertheless we expect the stronger growth momentum in the region to carry through 2008.”The Update also says that although China has become a major export market for the rest of East Asia, economies need to remain focused on finding new ways to meet China’s ever changing and highly competitive market.“The new challenge for China’s East Asian neighbours will be in making the transition from supplying inputs for China’s exports to also supplying its domestic market, something that may require significantly different research, production, branding and marketing skills and channels,” Brahmbhatt says