Malaysia, Indonesia Growth Accelerate on Manufacturing & Investments

Kuala Lumpur, Malaysia | May 18, 2010 by D-8 Secretariat

Malaysia & Indonesia accelerates on Economic Growth, signaling a rising confidence to the 2009 global financial crisis

Malaysia’s industrial production grew in March at a faster pace than economists estimated as orders for electronic goods and commodities increased amid a recovery in global demand. In the neighbouring country, Indonesia’s economic growth accelerated in the first three months of the year to the fastest pace since the third quarter of 2008 as households continued to spend and companies made more investments on rising confidence in the recovery.

Malaysia’s central bank forecasts economic growth may rebound to as much as 5.5 percent in 2010 as exports of goods such as Sime Darby Bhd’s palm oil and Unisem (M) Bhd.’s semiconductors recover. The bank increased interest rates this year ahead of neighbors including Indonesia and China as the economy emerged from a recession in the final quarter of 2009.

The “cyclical momentum is strong in Malaysia,” Deyi Tan, a Singapore-based economist at Morgan Stanley, said before the report. The rebound in “manufacturing exports, which was initially led by inventory restocking, appear to be persisting for longer.”

Export growth doubled in March, rising 36.4 percent from a year earlier, a report showed last week. Malaysia’s exports in the first quarter rose 30 percent, International Trade and Industry Minister Mustapa Mohamed told reporters in Subang Jaya, outside Kuala Lumpur, today.

Bank Negara Malaysia Governor Zeti Akhtar Aziz said last month policy makers may raise the growth forecast for 2010 after reports showed an improvement in exports and production.

Manufacturing sales rose 27.7 percent to 46.6 billion ringgit ($14.6 billion) in March from a year earlier, the Statistics Department said in a separate report today.

Malaysia’s manufacturing output rose 20.3 percent in March, after a revised 7.1 percent gain the previous month. Mining slid 0.5 percent, while electricity production advanced 24.9 percent.

Indonesia’s Growth Spurt

On the other hand, the neighboring country, Indonesia’s economic growth accelerated in the first three months of the year to the fastest pace since the third quarter of 2008 as households continued to spend and companies made more investments on rising confidence in the recovery.

South-east Asia’s largest economy expanded 5.7 per cent in Q1 from the corresponding period last year, accelerating from 5.4-per-cent growth in Q4, the official Central Statistics Agency said yesterday.

Meanwhile, non-seasonally adjusted quarter-on-quarter economic growth was 1.9 per cent, a reversal of the previous quarter’s 2.4-per-cent contraction.

The data showed the domestic economy’s recovery remained on track, even if growth was slightly less than expected. The median forecast of 12 regional economists polled by Dow Jones Newswires was for gross domestic product to have expanded 5.78 per cent in the first quarter from a year earlier. Meanwhile, the median projection of 10 economists who provided on-quarter forecasts was for GDP to have expanded 2.1 per cent.

Analysts said the latest report was unlikely to prompt the Indonesian central bank to start tightening monetary policy, as inflationary pressures weren’t yet seen as a threat. Bank Indonesia last week kept its benchmark overnight rate at 6.5 per cent, where it has been since August.

Household consumption, the pillar of the country’s economy, rose 3.9 per cent year-on-year in the first quarter; investment gained 7.9 per cent and exports increased 19.6 per cent, the statistics agency said. An 8.8-per-cent decline in government spending, however, weighed on growth, the data showed.

The Indonesian government has set a 5.8-per-cent growth target for this year, compared with a 4.5-per-cent expansion last year.

News Source: Businessweek. & Today Online.

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