Malaysia cuts ’06 growth target

KUALA LUMPUR – Malaysia’s trade-driven economy will expand 5,8 per cent this year, slightly slower than earlier official forecast, but growth will accelerate to six per cent next year, the Finance Ministry said Friday.

In its annual economic report released with the 2007 budget, the ministry said it aims to reduce the fiscal deficit only slightly and channel more funds into development and education as well as security. It also pledged to keep monetary policy supportive of economic growth amid price stability.The report didn’t say why it cut growth forecast this year from a six per cent target earlier.Prime Minister Abdullah Ahmad Badawi, however, noted challenges due to higher crude oil prices, inflationary pressures and prospects of slower growth in the second half of the year.The economy expanded 5,7 per cent on-year in the first six months.The report said economic growth next year would be broad-based, led by consumer spending, higher international demand for commodities such as oil, gas and palm oil and robust expansion in the services, manufacturing and agriculture sectors.”The economic growth momentum in 2006 is expected to continue into 2007 at a stronger pace of six per cent, supported by sound domestic economic fundamentals and a conducive business environment,” it said.The services sector is expected to grow six per cent in 2007 from 5,7 per cent this year but expansion in manufacturing will slow to 6,8 per cent from 7,3 per cent in 2006, it said.Mining is seen growing at 4,5 per cent in 2007, from 2,4 per cent, and construction to improve to 3,7 per cent, from 0,7 per cent.Agriculture however, will slow down to 4,7 per cent from 5,3 per cent.Higher tax collection and high crude oil prices will boost federal government revenue to 120,6 billion ringgit (US$35,6 billion) this year, up 13,5 per cent on-year, and to 134,8 billion ringgit in 2007, it said.Nampa-APIt also pledged to keep monetary policy supportive of economic growth amid price stability.The report didn’t say why it cut growth forecast this year from a six per cent target earlier.Prime Minister Abdullah Ahmad Badawi, however, noted challenges due to higher crude oil prices, inflationary pressures and prospects of slower growth in the second half of the year.The economy expanded 5,7 per cent on-year in the first six months.The report said economic growth next year would be broad-based, led by consumer spending, higher international demand for commodities such as oil, gas and palm oil and robust expansion in the services, manufacturing and agriculture sectors.”The economic growth momentum in 2006 is expected to continue into 2007 at a stronger pace of six per cent, supported by sound domestic economic fundamentals and a conducive business environment,” it said.The services sector is expected to grow six per cent in 2007 from 5,7 per cent this year but expansion in manufacturing will slow to 6,8 per cent from 7,3 per cent in 2006, it said.Mining is seen growing at 4,5 per cent in 2007, from 2,4 per cent, and construction to improve to 3,7 per cent, from 0,7 per cent.Agriculture however, will slow down to 4,7 per cent from 5,3 per cent.Higher tax collection and high crude oil prices will boost federal government revenue to 120,6 billion ringgit (US$35,6 billion) this year, up 13,5 per cent on-year, and to 134,8 billion ringgit in 2007, it said.Nampa-AP