Face off between Ariff and Zakariah over MIER’s 5.2% growth forecast for 2011

By Laura Lee

With Malaysia’s industrial production index (IPI) down since April to May, doubts have been raised about Malaysian Institute of Economic Research’s (MIER) 5.2% gross domestic product (GDP) growth projection for 2011.

This disturbing negative trend about the IPI was pointed out by its former executive director (ED) Professor Datuk Dr Mohamed Ariff during the question and answer session after the Malaysian economic outlook for the second quarter 2011 (2Q11) presentation by the institute at its 26th National Economic Briefing in Kuala Lumpur on 14 July.

Ariff did not think it was possible for MIER to maintain its 5.2% growth projection unless Malaysia posts improved second half (2H) year performance.

The IPI fell 5.1% year-on-year (y-o-y) in May on lower output in mining and electricity.

It fell 1.7% y-o-y in April while on a monthly basis, the IPI dropped by 1.3% (-7.2%: April ’11)

Malaysia’s 1Q11 GDP growth slowed to 4.6% y-o-y with all sectors down except for agriculture.

MIER ED Dr Zakariah Abdul Rashid said 2Q11 growth would be lower than 4.6% but at most would be above 4%.

He cited low consumer expenditure and slower export growth versus imports as the contributing factors for the poorer growth performance for the past few quarters.

Given the European sovereign debt problem, poor prospects in the United States and problems in China such as rising inflationary pressures, Zakariah does not expect Malaysia will not able to get much help externally.

Our only hope lies with the domestic elements. As such, he said MIER will maintain its 5.2% growth projection as the country has “powerful domestic driver of growth that will push our economy in the 2H”.

Earlier, Deputy Finance Minister Donald Lim Siang Chai announced his ministry would be asking government ministries and departments to step up their public expenditure in the 2H.

Whether this will happen is yet to seen. This includes the government’s initiatives to drive the economy via domestic demand and the implementation of its economic transformation programme (ETP).

At the National Conference on the 10th Malaysia Plan: Transformation Towards A High Income Advanced Economy on 18 July at Seri Pacific Hotel in Kuala Lumpur, Zakariah will present a paper on The Economic Impact of ETP on the Malaysian Economy by 2020: An Input-Output Analysis.

This paper, done in collaboration with MIER deputy director Ahmad Fauzi Puasa and research officer Raja Zarina, will show among other things the marked structural gap between Malaysia and other countries in terms of input-output.

Currently, we are 38% behind South Korea, 28% behind Poland and 10% behind Japan.

If we are equipped with these countries’ structural outfits, possibilities of us generating bigger output, household income and employment as well as a high income economy appear bright.

Don’t miss this conference which is co-organised by MIER and Universiti Utara Malaysia.

Other speakers include former Bank Negara Malaysia deputy governor Professor Tan Sri Dr Lin See Yan on Hope, Enterprise and Change.