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UBS: Malaysia's Economy To Grow By 5 Per Cent In 2014
Last update: 05/12/2013

KUALA LUMPUR, Dec 5 (Bernama) -- Malaysia's economy is projected to grow by five per cent next year from an estimated 4.3 per cent this year, said UBS Investment Bank Thursday.

Its Executive Director and Senior Asean Economist, Edward Teather, expected recovering exports to dominate the drag from fiscal consolidation in 2014.

He said Malaysia's exports were expected to recover next year in tandem with improving global trade as well as positive economic growth in the US and Europe, he added.

"Exports should accelerate on better world trade. We do not expect Bank Negara Malaysia to attempt to support the domestic growth by loosening monetary policy," said Teather via a conference call today.

He also expected the country's household debt to gross domestic product to moderate next year.

In a report released Thursday, UBS said the global economy would pick up to 3.4 per cent next year on the back of stronger US and European growth.

"In this environment we cannot hang our hats on credit cycle and exports cycle, we can't rely on those drivers to give us very strong growth moving forward.

"At the end of the day, the best source of growth is going to be...Malaysia to be a more efficient place, more easy place to do business and that is what the authority is trying to do," he said.

The Federal government deficit would be reduced to 3.7 per cent of the gross domestic product in 2014 from four per cent this year, he said.

The consumer price index inflation is forecast at 3.4 per cent in 2014 and 3.6 per cent in 2015 as more subsidies would be be scaled back resulting in higher inflation.

Teather said the tax reforms announced in 2014 Budget such as the goods and services tax and lower income tax should boost savings and support investment.

Other reforms will likely to continue to focus on business environment.

"The government has been encouraging the private sector to take part more in infrastructure," he said, adding that a key issue of the overall reform process was to improve efficiency.

"The challenge would be to keep people talking favourably about the reform and keep it moving," said Teather.

Malaysia's participation in the negotiations of the Trans-Pacific Partnership (TPP) reflected the country's willingness to reform in the coming years, he said.

He said the TPP, which is likely to materialise in 2015, would remove trade barriers and provide a level-playing field among the 12 countries involved in the negotiations.

On ringgit, Teather said the local unit is likely to fall against the US dollar in 2014, reaching 3.35 level by end-2014. It will reach the 3.40 level by end-2015.

"We are relatively positive on the ringgit in an Asean context, we expect it to fall against the rising US dollar in 2014 and 2015," said Teather.

He expect financial conditions in Malaysia to become less favourable and fiscal stimulus to diminish and Bank Negara Malaysia is unlikely to change its policy rates.



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US 3.9960/4.0000
S'pore 2.9561/9592
100 Yen 3.6393/6440
Sterling 5.3011/3068
Euro 4.6489/6544
Source: Bank Negara Malaysia

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