By Varsha Tickoo
KUALA LUMPUR, Dec 11 (Reuters) - Malaysia's economy is expected to deteriorate more sharply next year than earlier anticipated because of the global economic crisis, a Reuters poll shows.
Gross domestic product is expected to grow by 3.0 percent in 2009, according to the median of a poll, down from a forecast of 5.0 percent in a September poll, reflecting weaker demand at home and from abroad.
Inflation is seen at 3.5 percent for the year, lower than the previous forecast of 4.4 percent, mainly due to falling commodities prices, and analysts said this could lead to further interest rate cuts.
But easing commodities prices coupled with waning demand have weighed on Malaysia's exports, which fell for the first time in 17 months in October from a year earlier. Exports are equivalent to more than 100 percent of Malaysia's GDP.
"The global downturn in demand pulled down Malaysian exports in October, along with the drag from lower commodity prices. Indeed, data from around the world suggests a significant slowdown in global activity, and Malaysia will not be immune," said David Cohen at Action Economics.
With inflation easing and concern shifting to lagging growth, Malaysia last month took monetary and fiscal steps to stimulate its economy.
The central bank eased its key rate by 25 basis points, its first move in 2 ½ years. The government set aside 7 billion ringgit ($1.9 billion) for various infrastructure projects and said it was open to more liberalisation.
The central bank has said it is "flexible" in terms of policy, and economists expect monetary easing to continue amid the grim outlook for growth in Malaysia, with several forecasting a further cut of 50 basis in the first quarter of 2009.
The central bank did not change rates earlier this year when inflation hit near 27-year peaks in July and August. Inflation has since cooled, and with growth its main concern, the bank cut rates to 3.25 percent.
"Inflation pressures are easing, and like central banks around the world, this should allow further interest rate cuts by the Bank Negara over the coming months," said Cohen.
The ringgit is seen weakening to 3.71 to the dollar by the end of June 2009, compared to a forecast of 3.40 ringgit in September.
It has depreciated more than 9 percent against the dollar this year as of Dec 5.
Following are the results for the latest survey:
GDP CPI TRADE BALANCE
pct change pct change US$ bln
2009 2010 2009 2010 2009 2010 Action Economics 2.5 5.0 4.0 3.5 38.5 41.2 AmInvestment 3.0 4.0 3.0 2.0 33.0 33.0 Bank Islam 3.0 4.5 3.5 2.0 n/a n/a CIMB 3.0 4.5 2.3 2.5 36.8 n/a Citigroup 3.1 n/a 3.6 n/a 47.3 n/a IDEAglobal.com 3.3 3.75 4.5 3.5 n/a n/a JP Morgan 2.7 4.6 4.0 2.4 31.8 32.6 Kenanga Investment 3.3 5.4 3.5 3.7 42.6 45.9 Nomura 2.0 5.3 4.4 3.1 26.9 27.5 Standard Chartered 2.5 5.0 3.5 3.0 n/a n/a State Street 3.0 5.5 1.8 2.5 n/a n/a TA Securities 3.8 4.6 2.5 1.5 36.0 44.0 --------------------------------------------------------------- Median 3.0 4.6 3.5 2.5 36.4 37.1 Level of ringgit vs U.S. dollar at:
end-June 2009 end-Dec 2009
Action Economics 3.80 3.50
AmInvestment 3.50 3.45
Bank Islam 3.45 3.30
CIMB 3.68 3.68
Citigroup 3.80 n/a
JP Morgan 3.80 3.70
Kenanga Investment 3.50 3.35
Nomura 3.70 3.55
OCBC 3.72 3.60
Standard Chartered 3.75 3.60
State Street 3.75 3.55
TA Securities 3.58 3.55
------------------------------------------------
Median 3.71 3.55 Forecasts made in previous Reuters surveys (The following are for 2009. Earlier polls did not forecast 2010 figures):
GDP CPI TRADE BAL Ringgit vs
pct chg pct chg US$ bln USD (end June 09) Sep 2008 5.0 4.4 40.5 3.40 July 2008 5.1 4.6 34.8 n/a
Historical data:
GDP CPI TRADE BALANCE
pct change pct change US$ bln
2003 5.3 1.2 19.7
2004 7.1 1.4 21.5
2005 5.0 3.0 27.2
2006 5.9 3.6 30.9
2007 6.3 2.0 31.6
-------------------------------------------------- Average 5.9 2.2 26.2