16/05/2011 (Bloomberg) - Malaysia’s economic growth probably accelerated last quarter amid rising investment and demand for commodities, supporting an Asian expansion that has prompted policy makers to raise interest rates.

Gross domestic product may have increased 4.9 percent in the three months through March from a year earlier, after a 4.8 percent expansion in the previous quarter, according to the median forecast of 20 economists surveyed by Bloomberg News. The central bank is scheduled to release the economic data at 6 p.m. on May 18.

Bank Negara Malaysia has raised borrowing costs four times since the beginning of March 2010 to contain inflation as the Southeast Asian nation recovered from a recession the previous year. The ringgit reached a 13-year high this month as higher interest rates from China to Taiwan boosted Asian currencies even as regional growth eases from a rebound last year.

“The stellar performance in commodity exports was the major driver of economic growth, although we are also encouraged by a better-than-expected showing in private consumption,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore. “Our assessment on the overall economic outlook remains fairly sanguine at this point.”

Malaysia’s exports rose 7.8 percent in March from a year earlier as palm oil shipments surged 22.8 percent and electronics sales gained 6.7 percent. The amount of loans disbursed by the country’s lenders rose 17.3 percent in March from a year earlier, according to central bank data.

Asian Currencies
Most Asian currencies have climbed over the past year, partly because of foreign capital inflows seeking higher yields. The Malaysian ringgit has jumped 5.5 percent, advancing below 3 per U.S. dollar for the first time in more than 13 years on April 25. The currency fell 0.9 percent as of 9:55 a.m. local time today.

“With robust momentum in consumer credit showing the underlying demand growth, we expect Bank Negara to remain vigilant on inflationary pressures,” said Rahul Bajoria, an economist in Singapore at Barclays Plc. “At the current juncture, inflation risks outweigh growth risks.”

Inflation accelerated to a 23-month high in March, climbing 3 percent from a year earlier. Consumer prices probably rose at a faster pace in April, gaining 3.1 percent, according to the median estimate of 18 economists surveyed by Bloomberg News. The statistics department will release the figures on May 18.

The Southeast Asian nation’s economy may expand 5 percent to 6 percent this year, after growing 7.2 percent in 2010, according to the central bank. Policy makers led by Governor Zeti Akhtar Aziz resumed rate increases this month after pausing since July, saying borrowing costs still support growth.

‘Steady Growth’
“The assessment is for the Malaysian economy to remain firmly on a steady growth path, with growth improving gradually during the course of the year,” the central bank said May 5. “Growth will be underpinned by the firm expansion of domestic demand. Sustained employment conditions and income growth is expected to provide support to private consumption.”

Still, Malaysia’s export growth has cooled since a rebound last year helped the country recover from the 2009 global recession, and the March 11 earthquake and tsunami in Japan have clouded the outlook for overseas sales for exporters from the Philippines to Thailand.

Rising prices for raw materials may hurt companies that have difficulty passing the higher cost of production to consumers, said Yong Yin Ng, an analyst at Citigroup Inc. in Kuala Lumpur. He is “cautious” on power utility Tenaga Nasional Bhd. (TNB), construction and property group Gamuda Bhd. and budget carrier AirAsia Bhd.

Inflation Threat
“Overall business sentiment appears to have turned cautious as inflationary threat looms,” Ng said. “Export sluggishness could extend another quarter following the Japan quake and further ringgit strength.”

Citigroup said it views “positively” Petronas Chemicals Group Bhd. (PCHEM) and oil palm planter QL Resources Bhd., and considers mobile-phone operator Axiata Group Bhd. and casino group Genting Bhd. as “attractive.”

Singapore and Taiwan will release revised first-quarter growth numbers on May 19. Singapore’s economy may have expanded an annualized 22 percent last quarter from the previous three months, when it climbed 3.9 percent, according to the median forecast of seven economists surveyed by Bloomberg News. That’s less than the 23.5 percent growth estimated by the government on April 14.

Taiwan’s economy probably grew 6.2 percent last quarter from a year earlier, after expanding 6.92 percent in the three months through December, a survey of 11 economists showed. An April 29 preliminary estimate showed first-quarter growth of 6.19 percent.