Private investments to fuel growth [New Straits Time (Malaysia)]

(New Straits Time (Malaysia) Via Acquire Media NewsEdge) KUALA LUMPUR: Private investments will fuel the Malaysian economy in 2013, at a "high teens" percen-tage growth pace, running alongside public investments, Standard Chartered Bank said.

Its head of regional research for Southeast Asia Edward Lee said investments from the private sector will form the bulk of the total investments.

For the first three quarters of 2012, private investments grew by 21.8 per cent.

Being in the centre of an "outperforming" Asean region enhances Malaysia's attractiveness, which is already recognised through its supportive mix of policies, fundamentals and high confidence level.

"With a 10 per cent market share of foreign direct investments to the region, it is still sizeable for Malaysia," Lee said at the bank's annual Global Research Briefing 2013 here yesterday.

More projects under the Economic Transformation Programme will be realised this year, he said, adding that private investment will have a spillover effect on the construction, real estate and financial services sectors.

The bank's 4.7 per cent growth forecast for Malaysia in 2013 from a projected 5.0 per cent in 2012 was still healthy in the current global context, he noted.

On the supply side, Lee said the construction sector, despite being a small contributor to the GDP, will continue to remain strong in 2013, providing a strong multiplier effect to other economic activities.

Growth in the manufacturing sector, which has a bigger part, will however remain soft this year weighed by external uncertainties.

The second half of 2013 should see an improvement for the electronics sector which underwent a difficult period in 2012.

Inflationary pressures in Malaysia are likely to rise on demand- led and wealth effects, prompting a tighter monetary policy later this year which would likely raise the benchmark interest rate by 25 basis points.

The US economy's anticipated stronger performance in the second half will stimulate the economies in Asia including trade-dependent Malaysia, StanChart head of regional research David Mann said.

"Pent-up demand for investment, energy costs supporting growth together with consumers on a better footing mark a positive trend for the region," Mann said, adding that the traditional trade engine of Malaysia will also pick up growth.

Malaysia is considered as one of the most open economies in the world with trade making up 150 per cent of its GDP.

Unlike the recent past, 2013 started on a pessimistic note for the US, and the reversal of the payroll tax cut marked a major positive for the economy.

Marios Maratheftis, who is StanChart head of macro research, described the developments in the US following the passing of the fiscal cliff bill, as likely to be "messy" as the political administration negotiated the debt ceiling issue.

Part of the compromise would involve spending cuts which is likely to be felt in the first and second quarters of the year.

"It will be messy but it will not cause a recession, just a weaker growth." Despite the US weaker growth, "mess" in Europe and "rebalancing" in China, the global economy is likely to track a 2.8 per cent growth in 2013, he added.

On the commodities front, StanChart global head of commodities research Hsi Han Pin said palm oil will see a good start in 2013 and the positive demand mode will lead to more than 20 per cent growth in the next two years.

He expects the commodity to rise to RM2,900 per tonne in 2013, with price stability in the second half of the year.

Apart from the strong demand from China and India, the push factor is its discount to soya oil, which is also impacted by the recent weaker soya production levels.

Hsi expects crude oil prices to remain range-bound and close to the 2012 level, with risks emanating from higher supply onstream.

Demand for gold will also increase as central banks expand their balance sheets.

On the forex front, Callum Henderson projected the ringgit to appreciate to RM2.90 by the fourth quarter of 2013 from RM3.02 (first quarter), RM3.00 (second quarter) and RM2.97 (third quarter).

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