Current Economic Situation

Current Economic Situation

Malaysia's Finance Ministry revised downwards GDP growth forecast for 2009 from 5.4% to 3.5% in November amid the global financial crisis and expected slower growth next year. Inflation reached a 26-year high in August at 8.5% and eased slightly to 8.2% in September. Declining commodity prices and lower domestic demand are expected to reduce inflation in 2009. The Central Bank administered interest rate remains steady at 3.5% throughout the year as at mid-November 2008.The Malaysian economy registered an estimated 6.3% growth in the second quarter of 2008 and projected GDP growth for the year is 5%.

The Malaysian economy has been driven mainly by domestic demand and exports since 2007. Growth in private consumption slowed moderately to 9% in the second quarter of 2008 compared to 10.8% in 2007, while net exports contributed significantly to growth in the first half of 2008 mainly as a result of high global commodity prices. However, actual growth in volume term of exports will continue to decelerate in the second half of 2008 and in 2009, in line with weaker external demand.Malaysia's main exports are electronic equipment, petroleum and liquefied natural gas, wood and wood products, palm oil, rubber, textiles and chemicals. The combined share of exports to the US, EU and Japan as a percentage of total exports fell from 47% in 2000 to 37% in 2007. Top export destinations now include the US, Singapore, Japan, the Chinese mainland, Hong Kong and Thailand. Main imports include electronics, machinery, petroleum products, plastics, vehicles, iron and steel products and chemicals.

Main import partners include Japan, the US, Singapore and the Chinese mainland.In mid-November, the Ministry of Trade and Industry announced measures to encourage trade and investments in Malaysia. The measures included automatic issuance of manufacturing licence, removal of import duty for 48 product lines, extension of approval for representative/regional offices etc. To stimulate foreign investments in manufacturing and manufacturing-related services, the licence will now be issued only once for the lifespan of the business and the fee has been eliminated from June 2008.