Thursday 28 Mar 2024
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KUALA LUMPUR: The Malaysian economy contracted 6.2% on-year in the first quarter of 2009, the worst since the Asian financial crisis, as manufacturing output shrank sharply as exports and industrial production fell.

Bank Negara said on May 27 that manufacturing contracted 17.6%, mining fell 5.2% while agriculture saw a 4.3% decline. Services also showed a decline of 0.1% but construction rose just 0.6%.

According to economists, the contraction was worse than expected. In the fourth quarter of 2008, the economy grew at only 0.1%.

The central bank said the sharp contraction in the first quarter was due to a significant deterioration in external demand, following the deepening recession in advanced economies.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said the large inventory drawdown, particularly in the manufacturing and commodity sectors also contributed to the decline in growth in 1Q09.

However, the economy is expected to stabilise in the second half of 2009 supported by fiscal stimulus measures and measures to enhance access to financing, she said.

She said the signs of improvement include improved labour market conditions as retrenchment stabilises; continued lending activities by financial institutions; improved commodity prices from their lows; declining inflation improves purchasing power; improved performance of capital market and improvement in consumer sentiment index.

On the first quarter economic performance, Zeti said the manufacturing sector declined significantly by 17.6% (4Q 08: -8.8%), led by the 23.1% contraction in the export-oriented industries.

“In particular, the E&E industry contracted steeply by 41.4%. The domestic-oriented industries declined by 15.9% (4Q 08: -2%) due to weakness in both consumer- and construction-related sub-sectors,” it said.

Bank Negara said the services sector was flat following a marginal decline by 0.1% (4Q 08: 5.7%), primarily affected by sub-sectors closely linked to the manufacturing sector.

The agriculture sector recorded a contraction of 4.3% (4Q 08: 0.5%) due to lower output of both palm oil and rubber, while the decline in the mining sector of 5.2% (4Q 08: -5.7%) was due to falling crude oil and natural gas production.

The construction sector, turned around to register a positive growth of 0.6% (4Q 08: -1.6%) due mainly to an increase in construction of office space and the high-end segment of the residential sub-sector.

The banking sector remained resilient supported by strong capitalisation and stable credit quality. Although profitability has moderated by the conditions in the economy, the banking system remained financially sound, and supported by ample liquidity, is well-positioned to continue meeting the financing needs of the economy.

“As at end-March 2009, the risk-weighted capital ratio (RWCR) strengthened to 13.4%, whilst core capital ratio (CCR) improved by 0.9 percentage points to 11.5%,” it said.

The strengthened capital ratios resulted from capital raising exercises by a number of banking institutions to boost their capital positions. Meanwhile, excess capital amounted to RM44.6 billion.

Pre-tax profit amounted to RM4.8 billion in the first quarter of 2009. The annualised average returns on assets and equity was 1.7% and 19.9% respectively.

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