Impact Of EU Crisis On Local Economy Manageable So Far, Says Central Bank Of M'sia

KUALA LUMPUR, March 22 (Bernama) -- The impact of European sovereign debt crisis on the domestic economy has been manageable so far, according to the Central Bank of Malaysia. While Malaysia continues to face risks from potential escalation of the Euro debt crisis, the economy has sufficient buffers against shocks from external environment, Bank Negara Malaysia said in its Annual Report 2011. The country's resilience and capacity to withstand the Euro debt crisis and other potential external shocks from major trading partners have steadily improved over the years. This is attributable mainly to sound macroeconomic fundamentals, more resilient economic structure, stronger and more developed financial system and greater policy efficacy and flexibility. Nevertheless, given the possible scale and intensity of the shocks from Europe, domestic policymakers are in a high state of vigilance in monitoring and assessing the situation. It said closer cooperation among regional authorities will contribute to efforts to improve regional surveillance and monitoring systems against shocks, particularly, from violatile capital flows into the region. On the real sector side, Malaysia is exposed to the Euro debt crisis mainly through trade channel with potential spillover effects on private investment and consumption spending. In 2011, Malaysia's direct exports to European Union (EU) accounted for 10.4 per cent of total exports compared with 13.7 per cent in 2000. The indirect exposure to EU is estimated at 3.8 per cent of Malaysia's total exports in 2011, based on analysis of intermediate goods flowing from Malaysia to East Asian economies, which are then processed and exported worldwide. On average, net foreign direct investment (FDI) from the EU accounted for some 29 per cent of net FDI flows into Malaysia between 2008 and 2011, it said. -- BERNAMA