03/06/2011 (Bernama) - Malaysia can achieve between 5.0 and 6.0 per cent economic growth this year, backed by domestic demand and despite the slow global economic recovery amid higher commodity prices, says an economist.

Centennial Asia Advisors, Chief Executive Officer, Manu Bhaskaran said domestic demand was set to remain firm on account of the strong investment partly driven by the government's Economic Transformation Programme.

"High prices for oil, palm oil and rubber will also help," he told Bernama in an interview here.

Bhaskaran, a leading Asian economist based in Singapore, said the Asian economy may experience a slowdown during the second half year on the back of higher oil price and the need of greater fiscal therapy.

He said external demand would slow in the second half of the year as major economies were experiencing relatively strong growth in the early part of this year.

"Many countries are moving to reduce fiscal deficit aggressively to soften the level of demand in the economy, that would impact growth and employment," he said.

This scenario could be seen in all major countries, especially the Group of 3 (G3) nations comprising the United States, Japan and the economies of the euro-zone, Bhaskaran said.

"Overall, we can see a decline in demand, a build-up of the global inflation pressures and since all economies in this part of the world are open economies, we are bound to take some imported inflation pressure," he said.

He said the situation might get worse and affect economic growth as most Asian countries were export-dependent economies, while the central banks will tighten monetary policy to control inflation.

Bhaskaran also said that the Chinese economy was overheating and would have to cool down, otherwise it would be very damaging in the long term.

As a result, monetary tightening via rate increases and other administrative measures will help to slow the Chinese economy from excessively high growth to a more sustainable and healthy pace.

However, China would still grow strongly despite that so Asean's exports to China will remain on track, he said.

Luckily for Malaysia, it would have good positive structural factors to push growth, Bhaskaran said.

The ETP projects will bring significant investment, while higher commodity prices will continue to support rural income and keep demand high, he said.

On the impact of Japan's economy following the triple disasters it suffered in March, Bhaskaran said the rest of Asia including Malaysia should not be unduly negative.

"Asian economies have diversified their export, investment, tourism and other economic linkages away from Japan during the last 20 years of a stagnant Japanese economy. The impact on Asia will be relatively small," he said.

He believed that by the year-end, power supplies will have been largely restored and consumer confidence recovered.

"By then, we should see considerable reconstruction activity kicking in. Overall, economic growth for the year will see a small contraction but a rebound in 2012," Bhaskaran said.