By IRNA-Bernama
Kuala Lumpur : 2007 was a very good year for the Malaysian economy, with its pace “even exceeding” the government’s targeted 6 percent, Second Finance Minister Nor Mohamed Yakcop said Friday.
And he foresaw this momentum being maintained this year to meet the government’s expectation of 6.5 percent gross domestic product (GDP) growth for 2008.
He noted that the impressive growth kicked off in the third quarter of last year at 6.7 percent and this “strong momentum” continued into the fourth quarter for an overall growth rate of at least 6.0 percent.
Bank Negara Malaysia (BNM) is expected to announce the GDP data for the fourth quarter of 2007 by the end of January or early February.
In an interview on TV3’s “The Exchange” programme, Nor Mohamed said the economic performance was further bolstered by a “benign” inflation rate of only 2.0 percent which he expects to continue into 2008.
Yet another factor has been the government’s success in reducing the Budget deficit to 3.2 percent in 2007 from 5.5 percent in 2000, and “we are on track to achieve 3.1 percent in 2008.”
“So, the world can see that we are a very prudent government.
Prime Minister Abdullah Ahmad Badawi had given the commitment that we will be very prudent in our expenditure and this has been proven,” he added.
Nor Mohamed said the country’s good economic performance in 2007 was also reflected in the fact that Bursa Malaysia, with a market capitalization of RM1.1 trillion, created wealth worth about RM250 billion during the year, which he described as a record by any reckoning.
“Looking back, since Abdullah took over as prime minister towards the end of 2003, the stock market has increased. The value has increased by RM460 billion and of course last year the stock market increased by 32 percent,” he added.
Nor Mohamed expressed confidence that Malaysia can meet its targeted 6.5 percent growth for this year despite adverse external factors such as a possible recession in the United States, one of Malaysia’s largest trading partners.
He said this is because the Malaysian economy is no longer overwhelmingly dependent on exports and is much more diversified, especially with domestic consumption becoming a more significant player, which means economic growth is being generated to a greater degree by economic activities within the country.
“Over the years the government has very prudently and very viably diversified our economy and the prime minister has taken a very keen interest in this particular aspect of ensuring that the economy is resilient in withstanding the external challenges,” he said.
“For example, now our sources of growth include domestic consumption which grew by 14.5 percent in the third quarter.
“The services sector is showing double digit growth, and even our exports are less dependent on the U.S. and are focusing more on other countries including the South countries.”
Nor Mohamed described this as a form of decoupling from the U.S.
economy and disagreed with an analyst’s view that should the U.S.
growth slow by one percent, Malaysia’s will slow by 0.9-1.0 percent.
This is because, he said, in addition to creating more sources of growth, Malaysian exports have also diversified into the international markets – “If there is a recession in the U.S., it will not have that big or negative an impact on us because (our trade with the U.S.) will be offset by the growing demand from countries from China and India.
“My feeling is that whatever happens in the U.S., the momentum of growth in China and India will remain strong, and that will be very good for us in terms of tourism and exports of our commodities.
“China and India, alongside other developing countries, are becoming more important for Malaysia,” he added.