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Malaysia’s gross domestic product may rebound this year from a contraction in 2009 amid signs the global economy is recovering from the worst recession since the 1930s, the Malaysian Institute of Economic Research said.

Southeast Asia’s third-largest economy will probably expand 3.7 per cent this year and 5 per cent in 2011 after shrinking a projected 3.3 per cent in 2009, the partially government-funded research institute said in a statement in Kuala Lumpur today.

“The services sector will be the pillar of strength amidst a glum manufacturing sector,” the research group said. “However, Malaysia may not regain more strength until the global economy is back on track, which is going to be at a disappointingly slow pace.”

Asia is leading the world’s economic recovery after the region’s policy makers slashed interest rates to unprecedented lows and governments announced more than US$950 billion of stimulus measures. Malaysia’s consumer prices rose in December for the first time in seven months as food and housing costs climbed, and the government has raised its economic growth forecasts on signs of sustainable demand.
Prime Minister Datuk Seri Najib Razak said on January 20 the economy may expand 3.5 per cent or more this year, predicting faster growth than the government forecast in October.

Developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea and Singapore, will expand 8.1 per cent this year, faster than a November estimate of 7.8 per cent, the World Bank said on January 21. South Asia will grow 7 per cent in 2010, it said.

Export Growth

Exports of goods and services may grow 9.3 per cent this year after declining 17.5 per cent in 2009, the institute predicts. “Demand recovery as well as improving commodity prices are expected to lift exports growth,” it said.

Bank Negara Malaysia has refrained from following Australia and Vietnam in raising borrowing costs even as commodity prices rise amid a global economic rebound.

Inflation may average 2.3 per cent in 2010 from an expected 0.8 per cent in 2009, the institute predicts. The jobless rate may improve to 4.2 per cent this year from an estimated 4.5 per cent in 2009, it said. -- Bloomberg

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