International News Brief - Monday, August 18, 2014 GDP (Business Times, Business Times, WSJ, Bloomberg) Malaysias economy grew a better-than-expected 6.4 per cent in the second quarter on the back of stronger exports and robust domestic demand, the central bank said on Friday. (Business Times) Malaysia’s second-quarter (GDP) expanded a sizzling 6.4 per cent year-on-year in an unexpected surge that could prompt the central bank to raise rates for the second time in 2014. The expansion was above the consensus forecast of 5.8 per cent and placed average growth during the first half of the year at 6.3 per cent. The momentum could keep 2014s overall growth above the central banks forecast of 4.5 to 5.5 per cent, a point that Bank Negara Malaysia (BNM) governor Zeti Akhtar Aziz conceded during her media briefing although she declined to provide any specific forecasts beyond an understated: Its likely that growth could be higher than previously forecast. (Business Times) Bank Negara Malaysia Gov. Zeti Akhtar Aziz told a news conference after the data release that full-year growth will likely exceed earlier projections of between 4.5% and 5.5% in 2014. The central bank will issue a revised forecast after the governments budget presentation in October, she said. The government plans to introduce a long-delayed consumption tax of 6% in April 2015 and gradually shrink its subsidy program that covers wide-ranging essential goods from gasoline to cooking oil. Last year, the government scrapped subsidies on diesel and sugar and reduced discounts on a widely used gasoline variant to tighten spending. This made these fuels costlier, leading to higher prices for goods in the broader economy. Ms. Zeti said inflation is expected to remain within 3%-4% this year and temporarily rise in 2015 before stabilizing toward the long-term average of 3% in 2016, thanks to subdued external price pressures and moderate domestic demand. Not all economists agree that a rate rise in on the cards. While strong growth creates a space for further monetary policy tightening, we doubt the central bank would see the need to hike its policy rate further in the near term, says Singapore-based Credit Suisse Santitarn Sathirathai. That is because inflation will remain manageable while credit growth is likely to slow further, he said, predicting that the central bank will keep the main interest rate unchanged at 3.25% this year after raising it by 0.25 percentage point in July. (WSJ) Malaysia’s growth unexpectedly accelerated to the fastest pace in six quarters on surging exports, adding scope for the central bank to raise interest rates further. The ringgit rose to a nine-month high. “It’s one of the standouts so far, one of the few economies actually seeing growth picking up strongly,” said Krystal Tan, a Singapore-based analyst at Capital Economics Ltd. ’’This means that the central bank would have room to further normalize monetary policy.’’ The ringgit rose 0.6 percent to 3.1615 against the U.S. dollar as of 1:46 p.m. local time. It has strengthened about 3.6 percent this year, the second-best performer among 11 major Asian currencies tracked by Bloomberg. The FTSE Bursa Malaysia KLCI Index of shares erased losses and climbed 0.1 percent. The government is spurring investment by making it simpler for companies to operate in the country, with Malaysia moving up six ranks in the World Bank’s latest index of ease of doing business. PM Najib wants to increase the share of tourism, health care and other services to 65 percent of GDP by 2020 from 55.2 percent in 2013. (Bloomberg)
Posted on: Mon, 18 Aug 2014 02:12:22 +0000
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