BNM: M'SIAN ECONOMY EXPECTED TO GROW BY 4.5 TO 5.5 PCT IN 2010

KUALA LUMPUR, March 24 (Bernama)—- The Malaysian economy is poised for
further growth, buoyed by stronger domestic demand and an improving external
environment, with Gross Domestic Product (GDP) projected to grow by 4.5 to 5.5
per cent this year, says Bank Negara in its 2009 Annual Report.

Bank Negara Malaysia or BNM is the Malaysian central bank. Its headquarters
is located in Kuala Lumpur, and established to issue currency, act as banker and
adviser to the Government and regulate the country's credit situation.



Last year, the GDP contracted by 1.7 per cent as a result of the global
economic recession, which the central bank describes as "the deepest downturn in
modern history".

The economy declined by 6.2 per cent in the first quarter of last
year. It marked the first year-on-year contraction in real GDP since the third
quarter of 2001.

In its report released Wednesday, the central bank says the Malaysian
economy resumed its growth momentum in the fourth quarter of 2009. It grew by
4.5 per cent, with strengthened domestic and external demand contributing to
growth.

According to the report, the stabilisation of the domestic economy in the
second quarter and subsequent recovery in the second half of last year are
attributed to the implementation of fiscal stimulus measures, the aggressive
easing of monetary policy and comprehensive measures to ensure continued
access to financing.

In addition to higher public spending, the policy measures also helped to
revive private sector sentiment, which, together with improving labour market
conditions, led to an expansion in private consumption in the second half of
last year, it says.

"Signs also emerged to indicate that private investment activity had begun
to stabilise towards the end of the year. Moreover, external demand provided
further impetus to growth as the global economy, particularly regional
economies, gradually recovered," Bank Negara adds.

Looking ahead, Bank Negara says while the public sector will remain
supportive, growth is expected to be driven by greater private sector activity
and robust external demand from regional countries.

The underlying strong macroeconomic fundamentals, the healthy private sector
financial position and strong financial system, will support a private
sector-led recovery, while a supportive monetary environment, including
continued access to competitive financing will remain in place to foster
recovery in private sector activity.

The main contribution to growth this year would come from the expected
strengthening in domestic demand, driven mainly by the private sector, with
favourable domestic conditions, including improvements in the labour market,
rising disposable incomes and sustained consumer confidence, supporting a
further expansion in private consumption.

Bank Negara says, in line with strengthening external demand and increasing
domestic activity, private investment is expected to gradually recover in 2010.

In addition, higher capital spending by the Non-Financial Public Enterprises
(NFPEs) and the accelerated implementation of remaining projects under the
second stimulus package, will further reinforce domestic demand.

The recovery in the global economy, it points out, will provide a further
impetus to growth in 2010, particularly from the more robust expansion in the
regional economies.

Given the relatively large external sector in the economy, the strengthening
of external demand will have a positive spill-over effect on the broader
economy, in terms of employment, production and overall sentiments, thus
supporting
greater private consumption and investment, the central bank explains.

According to the report, the projected growth of 4.5 to 5.5 per cent in 2010
for the domestic economy is based on expectations of a gradual and uneven global
economic recovery, noting that the global economy is still facing several
downside risks, mainly in the advanced economies.

"Under these circumstances, domestic demand will be a key factor in driving
growth in 2010.

"In this environment, policies will remain supportive of growth,
in particular to ensure that private sector activity strengthens further and
that the recovery, is firmly established," it added.

On the monetary front, monetary policy will remain accommodative while focus
will continue towards ensuring that the private sector, in particular the small
and medium enterprises, have access to financing.

At the same time, the central bank says, there will be heightened vigilance
to ensure financial imbalances do not develop in the economy, which would
threaten macroeconomic stability and the sustainability of the economic
recovery.

It notes that the strong economic and financial fundamentals of the
Malaysian economy, place the domestic economy in a better position for a
stronger recovery, as global conditions improve further.

As the economy continues to recover in 2010, fiscal policy will remain
geared towards preparing the foundation for a stronger recovery of private
sector demand.

According to the central bank, the key to a sustained economic recovery is a
strong resumption of private consumption and investment.

Thus, the fiscal policy has accorded significant priority towards enhancing
the role of the private sector as the driver of economic growth.

--BERNAMA