The Star Online : Budget 2011

The Economic Report

Friday, October 07, 2011

Domestic factors to drive GDP

DESPITE heightened uncertainties in the global economy, gross domestic product (GDP) growth in Malaysia for 2012 is expected to be between 5% and 6% and will be driven largely by domestic factors.

5%- 6% expansion expected in 2012

THE fiscal policy for next year will remain prudent and supportive of economic growth due resilient domestic demand and reinforced by strong intra-regional trade.

Favourable outlook seen for Federal Government revenue this year

FEDERAL Government revenue in 2011 is projected to be favourable amid sustained expansion of the domestic economy coupled with strong external demand for commodities.

Slower growth for services sector

THE services sector grew 6.4% in the first half of this year compared with 8% a year earlier, supported by sturdy domestic consumption and investment activities.

Mining posts contraction on lower crude oil output

THE mining sector registered a contraction of 6.6% in the first half of this year due to lower production of crude oil.

Savings-investment gap expected to record surplus of 11%

GROSS national savings (GNS) is envisaged to increase 12.9% to RM284.7bil in 2011 with private sector savings expected to expand 39.1% to RM227.8bil.

Higher CPO, rubber output to boost agriculture

THE agriculture sector is forecast to expand by 4.7% in 2011 after growing by 2.1% in 2010 and the value added for the sector grew by 3.2% in the first half driven by higher crude palm oil (CPO) and rubber production.

Slower manufacturing growth

VALUE-ADDED of the manufacturing sector grew at a slower pace of 3.8% during the first six months of 2011, due to global supply chain disruptions, high-base effect and a weaker external environment.

Lower growth for construction

THE construction sector is expected to grow by 3.4% this year, compared with 5.1% in 2010, due partly to support from the acceleration of projects under the 10th Malaysia Plan in the second half of this year.

Positive consumer sentiment to drive domestic demand

DOMESTIC demand is expected to strengthen further, supported by strong private consumption and investment spending, driven by positive consumer sentiment and improved business prospects.

State governments’ expenditure likely to increase to sustain momentum

STATE governments are expected to incur higher expenditure to sustain the growth momentum and bridge the rural-urban divide as well as attract more investment to spur economic growth.

Govt borrowings expected to go up significantly this year

THE Government’s borrowings are projected to increase significantly this year, mainly on account of higher redemptions, loan repayments and deficit financing requirements.

National debt remains at low level

AS at end-June 2011, national debt continued to remain low at 28.5% of gross domestic product (GDP) (2010: 29.6%) while Federal Government debt is projected to be marginally higher at 53.8% of GDP (2010: 53.1%).

Labour market to gain

MALAYSIA’S sustained economic performance in 2011 would further benefit the labour market. With the growth in demand for labour outpacing supply, the economy would continue to operate under conditions of full employment.

Inflation up on soaring commodity prices

GOVERNMENTS, especially in developing countries are once again grappling with rising inflation brought about by the current round of soaring global commodity prices, particularly fuel and food commodities.

Programmes to prioritise rakyat’s concerns

THE Government will continue to prioritise the concerns of the rakyat in its strategic initiatives in year 2012 through the implementation of the Economic Transformation Programme (ETP), Government Transformation Programme (GTP) and 10th Malaysian Plan (10 MP).

Global economic activity set to moderate

GLOBAL economic activity is set to moderate this year amid heightened uncertainties over the pace of recovery in the advanced economies, with overall global growth projected lower at 4% this yeare versus 5.1% in 2010.

National per capita income to grow by 7.4% next year

WITH the strategies and programmes planned under Budget 2012, the Government expects to register a 5% to 6% expansion in the country’s economy in 2012.

RM40b allocated for human capital development

AS the Government recognises that the skills of the labour force, or human capital, is an important component in the production function of the economy, efforts have been made to develop it.

Focusing on strategies

THE 2012 Budget will focus on strategies and programmes to enhance the nation’s potential growth and improve the well-being of the rakyat.

Boosting private investment

AS capital stock accumulation is a necessary condition for economic growth, the Government had implemented several measures to reinvigorate private investment in the country.

More funds raised

GROSS funds raised in the capital market expanded strongly by 31.8% to RM106.2bil during the first seven months of 2011 (January-July 2010: -26.6%; RM80.6bil).

Monetary policy continues to support economy

MONETARY policy continues to support the growth of the economy this year, while managing the risk of inflationary pressures as well as to avoid financial imbalances. As the economy sustained its growth momentum in the first quarter of 2011, the Overnight Policy Rate (OPR) was adjusted upwards in May by 25 basis points to 3%.

Heading towards the Asean Economic Community

THE 1997/98 Asian financial crisis highlighted the need for a more integrated Asean to fully harness the potential of regional economic integration.

Insurance industry stays resilient with positive growth

THE insurance industry remained resilient and continued to record positive growth in the first seven months of 2011 with improved premium revenues, strong asset base and sustained profitability.

Robust and a world leader in the Islamic way

ON July 1, 2011, the Shariah Governance Framework was implemented to further strengthen the oversight role, authority, accountability, independence and competency of the Board of Directors, the Shariah Committee and the Management of the Ismanic financial institutions on shariah matters.

Banking on solid ground

THE Malaysian banking system continued to be resilient, supported by robust capitalisation, steady profitability and strong liquidity buffers during the first seven months of 2011.

Challenges aplenty in attaining dream status

FOR Malaysia to achieve a developed and high-income status, the nation must be able to compete regionally and globally. This requires redoubling of efforts in attracting investment as well as driving productivity and innovation.

Worldwide trends pushing inflation up

EFFECTIVE January 2011, the base year for the Consumer Price Index (CPI) was revised from 2005 to 2010 to better reflect household expenditure patterns, following the Household Expenditure Survey conducted from April 2009 to March 2010.

Trade surplus narrows during the January to July period

TOTAL trade expanded by 7.7% to RM724.1bil in the first seven months of 2011 (compared to 27.1% or RM672.4bil in 2010) supported mainly by higher regional demand in line with rising level of economic integration through trade and investment channels.

Exports to ease moderately

EXPORTS will see a moderate 6.8% pace of growth this year compared with last year’s 15.6% given the uncertainties in the external environment and an expected softening in commodity prices in the remaining months of 2011.

Investment activities and stronger ringgit to boost imports

GROSS imports are projected to increase by 7.4% this year (compared with 21.7% in 2010) underpinned by investment activities and the strengthening of the ringgit.

Global FDI on a gradual rise

GLOBAL foreign direct investment (FDI) flows increased modestly in 2010, after sharp declines in 2009 and 2008. Despite world production and trade rebounding to pre-crisis levels, FDI flows were about 15% below the average pre-crisis levels and 37% below the peak achieved in 2007.

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