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KUALA LUMPUR: The worst of the global economic crisis is over and developing countries like Malaysia can expect to register 6% gross domestic product (GDP) growth next year, according to UBS Investment Bank (global economics) managing director Paul Donovan.

“Our GDP forecast of 6% for Malaysia is slightly higher than concensus but we are sticking to it,” he told a media roundtable on Global Macroeconomics Outlook 2009 yesterday.

Donovan said in South-East Asia, Malaysia was expected to lead the pack in GDP growth, ahead of Singapore, Thailand and Indonesia, which were all expected to record lower GDP growth (5% or below).

“By and large, Malaysia has not been significantly affected by the global economic crisis, as compared with the West,” he said, adding that the United States and Europe were now on a growth trend, albeit slowly.

He said UBS expected the growth trends in the West to continue to be slow, at least for the next couple of years, and that it might even take five to six years for the spare or excess stock capacity to be absorbed by the global markets, as many were still trying to reduce their inventory levels.

“While the worst is over, banks in the developed world are still cautious with their lending practices,” Donovan said, adding that many small and medium-scale enterprises were still facing a credit squeeze by financial institutions.

On the Asian front, he said, the economic fundamentals were much stronger, lead by China and India.

“We expect a V-shaped recovery for these countries, including Malaysia.”

He said that there was very little past impairments or obstacles to economic growth, as opposed to the West.

Donovan also said inflation, unemployement rates and interest rates were not expected to rise significantly in the region.

“Infact, we expect a strong rebound for Malaysia,” he said, but conceded that the country as a trading nation might have been slightly affected by lower export demand, especially from the developed world, during the peak of the global economic crisis.

During the crisis, he said, government spending and pump-priming activities worldwide had lifted consumer spending confidence.

“But we foresee lower government spending next year and expect the private sector and the domestic market to be the main drivers of growth.”

On the US dollar, Donovan said the currency might even strengthen in the coming months but was expected to weaken over the longer term.

On the stock market, UBS Securities Malaysia Sdn Bhd managing director and head of Malaysia Equities Leong Fee Yee said it was fairly healthy and that any upside would depend on the earnings performance of companies.

“And they (company earnings) have to be sustainable,” she said.

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