MARKET DEVELOPMENT
BNM Annual Report: Economy to See Steady Growth in 2014
BNM Annual Report: Economy to See Steady Growth in 2014
20/03/2014 (The Star) - Bank Negara Malaysia expects the economy in 2014 to grow at a steady rate, underpinned by the services and manufacturing sectors but amid higher inflation due to domestic costs factors.
In the BNM Annual Report 2013 issued on Wednesday, it projected a conservative economic growth of 4.5% to 5.5% for 2014 compared with the earlier Federal Government’s projection of 5% to 5.5%.
The factors for the conservative growth outlook were due to risks from the global economy and external factors.
Bank Negara expects the manufacturing sector to grow at 6.2% in 2014 compared with 5.9% in 2013 and the services sector to expand by 3.5% (2013: 3.4%).
“The services and manufacturing sectors will be the key drivers to the overall growth, benefiting from the improvement in the global economic environment,” it said.
As for agriculture, the projection is 3.8% (2013: 2.1%) due to higher production of palm oil as both yields and the number of matured palm trees increase.
Mining and quarrying is forecast to expand at 0.5% from 1.6%. The boost from the mining sector would be due to higher crude oil and natural gas production from deepwater and marginal fields; and enhanced oil recovery.
Construction could see slower growth at 10% compared with 10.9% as the completion of several large civil engineering projects will more than offset the progress in existing projects in the transport, utility, and oil and gas sectors.
Bank Negara said domestic demand would remain the key driver of growth, albeit at a more moderate pace.
Private investment is forecast to register robust growth for the fifth consecutive year, driven by the ongoing implementation of multi-year projects and the improvement in external demand,” it said.
Bank Negara said public investment was projected to see higher growth, underpinned by government and public enterprise capital spending. As for private consumption, it expected the growth would be supported by healthy labour market conditions and sustained income growth.
However, public consumption was expected to see lower growth due to the ongoing fiscal consolidation.
Bank Negara expects headline inflation to average 3% to 4% in 2014, due mainly to domestic cost factors. This is higher that the earlier Federal Government projection of 2% to 3%.
“These include the recent price adjustments arising from the subsidy rationalisation and the spill-over effects of these adjustments on the prices of other goods and services.
“The higher cost pressures, however, will be partly contained by subdued external price pressures, continued expansion in domestic capacity and a moderation in domestic demand,” it said.
Bank Negara stated notwithstanding the moderation in domestic demand, the underlying fundamentals of the Malaysian economy remained strong.
“Growth will be driven by the private sector across a diversified range of economic activities. Of importance, employment remains strong and incomes are rising. The financial system is resilient with financial intermediation expected to provide continued support to investment and consumption.
“The strength of Malaysia’s external position also remains intact, with international reserves at healthy levels and external debt within prudent limits,” it said.
Bank Negara cautioned, however, that downside risks to global growth could affect the performance of the domestic economy in 2014.
In the BNM Annual Report 2013 issued on Wednesday, it projected a conservative economic growth of 4.5% to 5.5% for 2014 compared with the earlier Federal Government’s projection of 5% to 5.5%.
The factors for the conservative growth outlook were due to risks from the global economy and external factors.
Bank Negara expects the manufacturing sector to grow at 6.2% in 2014 compared with 5.9% in 2013 and the services sector to expand by 3.5% (2013: 3.4%).
“The services and manufacturing sectors will be the key drivers to the overall growth, benefiting from the improvement in the global economic environment,” it said.
As for agriculture, the projection is 3.8% (2013: 2.1%) due to higher production of palm oil as both yields and the number of matured palm trees increase.
Mining and quarrying is forecast to expand at 0.5% from 1.6%. The boost from the mining sector would be due to higher crude oil and natural gas production from deepwater and marginal fields; and enhanced oil recovery.
Construction could see slower growth at 10% compared with 10.9% as the completion of several large civil engineering projects will more than offset the progress in existing projects in the transport, utility, and oil and gas sectors.
Bank Negara said domestic demand would remain the key driver of growth, albeit at a more moderate pace.
Private investment is forecast to register robust growth for the fifth consecutive year, driven by the ongoing implementation of multi-year projects and the improvement in external demand,” it said.
Bank Negara said public investment was projected to see higher growth, underpinned by government and public enterprise capital spending. As for private consumption, it expected the growth would be supported by healthy labour market conditions and sustained income growth.
However, public consumption was expected to see lower growth due to the ongoing fiscal consolidation.
Bank Negara expects headline inflation to average 3% to 4% in 2014, due mainly to domestic cost factors. This is higher that the earlier Federal Government projection of 2% to 3%.
“These include the recent price adjustments arising from the subsidy rationalisation and the spill-over effects of these adjustments on the prices of other goods and services.
“The higher cost pressures, however, will be partly contained by subdued external price pressures, continued expansion in domestic capacity and a moderation in domestic demand,” it said.
Bank Negara stated notwithstanding the moderation in domestic demand, the underlying fundamentals of the Malaysian economy remained strong.
“Growth will be driven by the private sector across a diversified range of economic activities. Of importance, employment remains strong and incomes are rising. The financial system is resilient with financial intermediation expected to provide continued support to investment and consumption.
“The strength of Malaysia’s external position also remains intact, with international reserves at healthy levels and external debt within prudent limits,” it said.
Bank Negara cautioned, however, that downside risks to global growth could affect the performance of the domestic economy in 2014.