Saturday August 18, 2012

Financial Times praises our gravity-defying economic growth

KUALA LUMPUR: Emerging economies don't always get favourable observations from hard-boiled foreign journalists.

But Malaysia seems to be getting more laudatory remarks from them these days.

Bernama cites Jeremy Grant's article on Kuala Lumpur's new financial centre - the Tun Razak Exchange - and the state of the Malaysian economy in the Financial Times yesterday as examples.

“With much of the world economy experiencing anaemic growth at best, it is hard to believe that any country would contemplate a project on this scale.

“Yet Malaysia's economy is enjoying a gravity-defying boom that is confounding sceptics. Second-quarter gross domestic product figures out this week showed the economy grew by 5.4%, way above consensus expectations of 4.6%, and the 4.9% recorded - after an upward revision - for the previous quarter,” Grant wrote.

He attributed this to big-ticket government spending, lending by well-capitalised banks and robust consumer demand, fuelled by pay rises to civil servants and cash handouts that have even seen taxi drivers get vouchers for free replacement tyres.

“Malaysia's stock market has been among the best performers in the world, buoyed by big flotations, including Felda, a state-controlled palm oil producer, the second-largest initial public offering after Facebook when it raised over US$2bil (RM6.2bil) last month.

“Bankers are cashing in with a parade of further IPOs expected within months.

“Much of the impetus behind the growth comes from an economic transformation programme' initiated by Prime Minister Datuk Seri Najib Tun Razak when he came to power in 2009.

“This involves dozens of government-backed projects designed to boost per capita income to US$15,500 (RM48,000) by 2020, from US$9,600 (RM29,760) last year and lift Malaysia out of its middle-income trap',” added Grant.

The Financial Times, meanwhile, quoted an analyst at Moody's who had admitted being sceptical about the programme's ability to spur private sector development when it was launched.

Christian de Guzman had written that he was more convinced now, adding: “The proof of the pudding is in the eating but so far they are on track. In aggregate, there are just so many things going on (in the economy).”

Grant wrote that “Not only has Malaysia experienced strong domestic demand offsetting its vulnerability to weakening demand for its exports - much of them electronics destined for Europe; it has also benefited from deeper ties with economies in Asia.

The United States was Malaysia's largest trading partner in 2006, absorbing 18.8% of its exports, while Asia Pacific accounted for 60%.

By last year the US share had dwindled to 8.3% while Asia Pacific rose to 69%.

Malaysia's healthy economy - and the resulting “feel good” factor - stands in contrast with growing anxiety among neighbours in South-East Asia as the global downturn has tarnished their economies.

However, analysts point out a nagging concern for Malaysia: rising household debt, caused by rapid growth in credit card usage.

Grant noted that as the transformation programme's projects take root, Bank Negara has forecast full-year growth at the upper end of its 4%-5%.

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