Friday March 31, 2006

6% growth projected

THE Malaysian economy is projected to grow by an average of 6% annually under the Ninth Malaysia Plan (9MP).

The growth will be supported by domestic demand with strong private investment and consumption.

Per capita gross national product (GNP) in current terms is forecast to grow by 5.9% per annum to RM23,573 in 2010. Per capita GNP in terms of purchasing power parity is expected to increase to US$13,878 in 2010.

On the supply side, growth will be supported by expansion in the manufacturing, services and agriculture sectors. Policies and strategies will be directed towards enhancing competitiveness as well as focusing on productivity and transition into higher value added and knowledge-based activities.

The Third Industrial Master Plan (IMP3), 2006-2020, will guide the manufacturing sector in the 9MP. The sector is expected to become more dynamic and competitive and projected to expand at an average rate of 6.7% per year.

In the non-resource based industries, the electronics sub-sector is expected to pick up during the first half of the 9MP period following the upcycle in global electronics demand. East Asia and the United States are expected to be the major sources of demand.

In line with this, the sub-sector is estimated to grow at an average rate of 7.7% per annum during the 9MP period and constitute 29.4% of the total manufacturing value added in 2010.

The services sector is expected to sustain its growth momentum at 6.5% per year on average during the 9MP period. Growth will come from the finance, insurance, real estate and business services as well as the wholesale and retail trade, hotels and restaurants sub-sectors.

The finance, insurance, real estate and business services sub-sector is projected to grow at an average rate of 7% per year while the wholesale and retail trade, hotels and restaurants sub-sector is expected to increase by 6.8% per year due to increasing domestic demand and the expansion of distribution modes.

Growth in the transport, storage and communications sub-sector is projected to remain robust at 6.7% per year with major sources of growth expected from the communications and transportation industries.

The agriculture sector is expected to grow by 5% per annum with palm oil, rubber and food being the main sources of growth. The mining sector is expected to expand at an average rate of 3.4% per annum.

On the demand side, growth will be driven by strong domestic demand. Private investment is projected to grow by 11.2% per year on average. Its share of total investment is expected to increase from 44.2% in 2005 to 51.4% in 2010. In nominal terms, total private investment in the 9MP is projected to be RM310bil, or averaging RM62bil per annum – higher than the RM175.9bil achieved during the 8MP.

Of the total private investment, 32.6% is expected to be invested in manufacturing, 29.9% in services, 14.3% in construction, 12.9% in mining and 10.3% in agriculture. Public investment is projected to grow by 5% per annum.

Private consumption is expected to expand by an average of 6.9% per year, higher than the growth achieved during the 8MP. Public consumption is projected to grow by 5.3% annually, lower than the 10.2% recorded during the 8MP.

Macroeconomic management for the 9MP will focus on maintaining the macroeconomic stability to consolidate the economy on a sustainable growth path to achieve distributional goals and improve Malaysians' quality of life.

The key macroeconomic strategies for the 9MP period are:

TO achieve a credible growth rate while maintaining strong economic fundamentals;

TO strengthen competitiveness to sustain demand for Malaysian products and services;

TO enhance higher contribution to growth from private sector and government-linked companies and attract quality foreign direct investment to accelerate progress towards higher technology activities and expand market linkages;

TO promote the development of new sources of growth in the agriculture, manufacturing and services sectors as well as broadening the knowledge-based economy;

TO raise the efficiency of capital, productivity of labour and the contribution of total factor productivity; and

TO sustain pragmatic fiscal management and implement appropriate monetary policy to support domestic economic activities.

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