KUALA LUMPUR: Malaysia’s economy is expected to grow “above expectations” this year, having posted a solid gross domestic product (GDP) growth of 6.3% for the first half of the year, said Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar.
“We reckoned that with the strong first-half numbers, the overall growth rate for the full year will be better than what we are predicting,” he told reporters on the sidelines of Channel NewsAsia’s Business Insights Malaysia 2014 leadership forum on Sept 04 (Thursday). The Edge Media Group is the event’s media partner.
Abdul Wahid’s comments on Malaysia’s economic growth echo that of Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz, who in August had said that the country’s GDP growth would likely exceed the central bank’s earlier projection of 4.5% to 5.5% for 2014.
He said any revision to the forecast growth will be announced by the Prime Minister in his speech, when he tables the 2015 Budget at the Dewan Rakyat in October.
On the inflation rate, Abdul Wahid said the implementation of the goods and services tax on April 01, 2015, will cap inflation at below 5%, adding that Malaysia’s overall inflation situation is “manageable”.
The inflation rate is currently at 3.2%, with the average for the first seven months of this year at 3.3%, he noted.
Abdul Wahid declined comment when asked whether another round of fuel subsidy rationalisation will be announced in the upcoming budget, but said the government is committed to fiscal consolidation and among others, subsidy rationalisation.
“We are committed to reducing the budget deficit to 3.5% this year and 3% for 2015,” he said. Going forward, he expects the Malaysian economy to remain on a steady growth path, adding that it is well on its way to achieving its developed nation status target by 2020.
“The share of the manufacturing sector has moderated to 24.5% of GDP. The services sector now accounts for 55.2% of GDP, [and it is] well on track towards achieving our target of 60% by 2020, to reflect a fully-developed economy,” he said.
Meanwhile, on the restructuring of Malaysian Airline System Bhd (MAS), Abdul Wahid said there is a need to undertake a “strategic reset” for the airline, as detailed by Khazanah Nasional Bhd.
He was commenting on the government’s decision to retrench 6,000 MAS staff, as part of its move to revive the loss-making national carrier.
Abdul Wahid reiterated that the RM6 billion to be spent on MAS’ restructuring exercise is an investment by Khazanah, adding that the sovereign wealth fund will be able to recover the amount, with proper execution of the plan.
“The RM6 billion is an investment by Khazanah and something which I believe when executed well, Khazanah will be able to recover it,” he said.
Pointing to the UEM Group as an example, he said Khazanah had stepped in to take control of the group to address, among others, its huge debt burden and corporate governance issues.
“Khazanah invested RM5.1 billion [then] and has [since] realised values of double that amount,” said Abdul Wahid.
“From a government’s perspective, all of us are very much supportive of the measures and plans announced for MAS. Indeed, it is our hope that all Malaysians will support the restructuring of MAS.”
This article first appeared in The Edge Financial Daily, on Sept 05, 2014.