Economic and Industry Outlook
With poor global economic conditions, Bank Negara Malaysia (BNM) recently forecasted
GDP growth at a range of 4.5% – 5% for the second half of 2013. With improving external
demands, Malaysia will likely show a better economic growth in 2014. The World Bank
and IMF have projected a GDP growth of 5.1% – 5.2%, with IMF predicting an average of
5.7% for the ASEAN nation (Cai, 2013). The economy’s GDP expanded by 4.3% in 2nd
quarter of 2013. Domestic demand which grew by 7.3%, contributed significantly to the
economy’s growth. Other domestic oriented sectors such as construction, services and
manufacturing grew by 9.9%, 4.8% and 3.3% respectively (Business News, 2013).
The inflation rate managed to reach 2.0% in July 2013 and inflation in the food and
beverage category increased to 4% in the same month because of heavy demand during
festive period which led to increase in prices of meat. Therefore, inflation rates are
projected to increase due to stronger domestic demand but are not predicted to be more
than 3% in the next 12 months. This however, does not provide for festive periods.
BNM has maintained the Overnight Policy Rate (OPR) at 3% throughout the last few
years. This is to support domestic growth and prevent inflation (Kumar, 2013). By keeping
the OPR at consistent level, it prevents disruption to businesses. The stable wholesale and
retail industries led to positive impacts on the industry growth. Therefore, with the
projected interest rate remaining stagnant in the near future, positive growth for the
industries should follow.
The unemployment rate has been unchanged over the years at 3%. The jobless rate has
been hovering around 3% this year. The Department of Statistics has therefore maintained
prediction of 3% in unemployment levels for the coming year. This allows the economy to
operate efficiently in full employment conditions. With Economic Transformation Program
(ETP) projects currently in motion and some will begin in the coming months, the
employment levels are expected to further improve (Labour Force Statistics Malaysia,
2013).
Economic growth will continue to be headed by domestic demand, given weak external
demands from falling global economies. Domestic demand will likely be stimulated
through consumption, investment, capital spending by domestic-oriented industries and
through the current ETP projects being carried out (Fauzi, 2013)
Since the economy is forecasted to be driven by domestic demand, a domestic-oriented
industry should be worth investing in. The construction sector is profitable and has much