The Malaysian economy is likely to grow at 5.5 per cent this year amid the external conditions and high inflation.
“The figure (5.5 per cent) is still a respectable growth rate given the challenges,” Public Bank Bhd group economist Nasaruddin Arshad said in the bank’s Economic Review for June, released here yesterday.
Last year’s growth was at 6.3 per cent.
Nasaruddin said based on the strong economic fundamentals, the Malaysian economy has the capacity to sustain its domestic activity and weather the challenges or headwinds.
He said the country’s economy has strong fundamentals which had been aggressively built in the post-Asian financial 1997/98 crisis.
“The strong economic fundamentals are characterised by strong external position, strong and stable ringgit, high national savings and strong banking system.
“The government also continues to maintain its growth-friendly fiscal and monetary policies to support growth without unnecessary pressure on inflation,” he said Nasaruddin said Malaysia’s major trading partners would also continue to provide support to the country despite the global economic slowdown.
“Although expectations remain that major global economies such as US, euro area and Japan are likely to soften in the second half of this year, they are unlikely to enter into a recession.
“Based on this, it is not unreasonable to conclude that these economies should remain supportive to Malaysia’s exports and thus the Malaysian economy,” he said.
He said the sustained growth in Asia was also positive to the Malaysian economy as the intra-regional trade between Malaysia and these economies had grown in significance in recent years.
Nasaruddin said the strength of Malaysia’s external position was reflected in the high international reserves and low external debt.
“As at May this year, the level of international reserves has increased to US$125.2 billion (US$1=RM3.26) and sufficient to cover 9.8 months of retained imports and about five times short-term external debt, helped by the consistently large current account surplus and the steady inflows of foreign direct investment and portfolio capital,” he said.