RAM Ratings: Malaysia economy to grow 5.3% in 2013

RAM Ratings expects Malaysia's economy to expand by 5.3% in 2013 and pick up pace to 5.8% in 2014, underpinned by robust demand and recovery of the external environment.

In its Economic Outlook report issued on Thursday, the ratings agency said domestic private consumption was anticipated to record healthy growth due to favourable labour-market conditions, aided by a slew of government initiatives and handouts.

As for global conditions, RAM Ratings expected a gradual recovery this year "as policymakers in systemically important economies adopt an accommodative stance in an attempt to combat their respective structural deficiencies".

On the domestic front, it expected healthy growth in private consumption, supported by favourable labour market conditions following the government's initiatives and handouts.

RAM Ratings also expected private investment to expand further, supported by the improved business environment and relatively accommodating interest rates.

"While fiscal policy remains supportive of economic activity, the growth of public expenditure should moderate to meet the government's longer-term fiscal-consolidation objectives and as the 'public-private partnership' method of financing has assumed a larger role in funding various development projects," it said.

The ratings agency also expected Malaysia's exports to improve, in line with the revival of certain advanced economies.

It expected domestic monetary and financial conditions to remain relatively stable this year.
On the Overnight Policy Rate, it said Bank Negara Malaysia was "likely to adjust the upwards by 25 to 50 basis points this year", in response to persistent domestic credit growth and as longer-term inflationary pressures begin to develop.

On the ringgit, RAM Ratings said the local currency retained considerable upside potential because of its strong fundamentals.

In its outlook for the domestic bond market, RAM Ratings expected it to strengthen in 2013, with estimated gross issuances by the government at RM90bil to RM95bil. It expected the private debt securities to be around RM95bil to RM100bil.

"The authorities' supportive fiscal stance and improvements in the domestic business environment will continue underscoring market activity," it said.
(The Star Online)