SCB Prospectus - Announcements - Bursa Malaysia

Company No. 462648-V
7. INDUSTRY OVERVIEW AND OUTLOOK (CONT’D)
Over the near term, Asia is expected to continue leading the global recovery. The pace of the
recovery will, nonetheless, remain uneven across Asia. China’s growth is expected to return
to double digits in 2010, with private domestic demand boosted by measures to increase
consumption and private investment. This will have positive spillovers for the rest of the
region, as Chinese demand boosts imports, particularly of commodities and capital goods.
Asia’s relatively strong cyclical position may pose near-term risks as the capital inflows could
lead to overheating in some economies and increase their vulnerability to a strong upswing in
the credit and asset price cycles, with the propensity for a subsequent abrupt reversal.
Over the medium term, Asia’s main policy challenge will be to ensure that private domestic
demand becomes a more prominent engine of growth. Once the adjustment in inventories
has run its course, Asia’s exports to advanced economies should moderate somewhat, as
domestic demand in these economies is expected to remain below pre-crisis levels,
undermining global demand.
(Source: Regional Economic Outlook, Asia and Pacific: Leading the Global Recovery; Rebalancing for
the Medium Term, International Monetary Fund, April 2010)
7.3 OVERVIEW AND OUTLOOK OF THE MALAYSIAN ECONOMY
The Malaysian economy contracted by 1.7% in 2009, a year when the global economy
experienced its deepest downturn in modern history. The domestic economy experienced the
full impact of the global recession in the first quarter, declining by 6.2%, marking the first yearon-year
contraction in real GDP since the third quarter of 2001. The collapse in global
demand and world trade led to double-digit declines in Malaysia’s exports and industrial
production. Given the high degree of openness of the economy, the deterioration in external
demand affected employment, income and overall business and consumer sentiments,
causing private consumption and private investment activities to decline in the first quarter of
the year. Growth during the quarter was also affected by large inventory drawdown,
particularly in the manufacturing and commodity sectors.
However, the accelerated implementation of fiscal stimulus measures, the aggressive easing
of monetary policies and the comprehensive measures introduced to ensure continued
access to financing, contributed to the stabilisation in the domestic economy in the second
quarter and the subsequent recovery in the second half of the year. In addition to higher
public spending, the policy measures also helped to revive private sector sentiment, which,
together with improving labour market conditions, led to an expansion in private consumption
in the second half of the year. Signs also emerged to indicate that private investment activities
had begun to stabilize towards the end of the year. Moreover, external demand provided
further impetus to growth as the global economy, particularly the regional economies,
gradually recovered. As a result, the Malaysian economy resumed its growth momentum in
the fourth quarter, growing by 4.5%, with strengthened domestic and external demand
contributing to growth.
The Malaysian economy is projected to grow by 4.5% to 5.5% in 2010, underpinned by
strengthening domestic demand and an improving external environment. While the public
sector will remain supportive, growth is expected to be driven by greater private sector activity
and robust external demand from the regional countries. The underlying strong
macroeconomic fundamentals, the healthy private sector financial position and the strong
financial system will provide support to a private sector-led recovery. A supportive monetary
environment, including continued access to competitive financing will remain in place to foster
recovery in the private sector activities.
(Source: Bank Negara Malaysia Annual Report 2009)
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