ECONOMIC activities surged in the first three months of 2014 chalking up a 6.2 per cent expansion in gross domestic product (GDP), paving the path for another year of robust growth.
Describing it as exceptional and encouraging, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said Q1 GDP reflected the recovery in the trade sector as well as domestic demand. Consumption and investment activities also remained robust during the period."If growth remains in the five to 5.5 per cent region, then we will be in the upper end of projection for growth for the year as a whole," Zeti said at a briefing yesterday.
The central bank has projected the economy to grow by between 4.5 and 5.5 per cent this year.
Exports will continue to benefit from recovery in the advanced economies while private domestic demand is expected to remain the key driver of the overall growth.
The borrowing costs is expected to be increased when the monetary policy committee (MPC) meets on July 10.
Michael Wan of Credit Suisse expects the "mix" for growth to shift towards exports and investment and away from consumption. "We continue to look for robust 2014 GDP growth, with the balance of risks tilting to the upside."He expects public investment, in particular, to pick up by the second-half of this year as the government continues to press on with infrastructure plans under the Economic Transformation Programme, namely the MRT Line 2 and Tun Razak Exchange.
Ho Woei Chen of UOB Bank said both domestic demand and improvement in the external environment will continue to contribute to the GDP growth.
On suggestion for the ringgit to be pegged again, Zeti said a flexible exchange rate regime is suitable for Malaysia as the changes in the international economic and financial landscape requires flexibility.
Meanwhile, Bank Negara Malaysia has redefined its external debt to include non-resident holdings of ringgit-denominated debt securities, non-resident deposits, trade credits provided by foreign trade counterparts and other debt liabilities.
As at end of March 2014, Malaysia's redefined external debt stood at RM700.1 billion, equivalent to US$212.5 billion or 65.2 per cent of gross domestic product (GDP) compared with RM694.6 billion or US$209.2 billion, equivalent to 70.4 per cent of GDP as at end-December 2013.
Governor Tan Sri Dr Zeti Akhtar Aziz said the increase in the external debt was due mainly to higher offshore borrowing by the private sector and non-resident holdings of ringgit-denominated debt liabilities.
Following the redefinition, the potential for currency mismatches in the country's external indebtedness is reduced since these debt securities are ringgit-denominated obligations.
"It is also crucial to note that the federal government debt remains unchanged. The redefinition of external debt is a prudential measure which allows the government to better assess its exposure to non-residents.
"Importantly, although the redefined external debt level is higher, Malaysia's external indebtedness indicators remain within the international benchmark for prudence and external soundness," she added.
/NST Bernama 17-05-2014
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