Malaysia exits recession as govt boosts spending
Malaysia exits recession in 2Q as government boosts spending, world economy stabilizes
By Eileen Ng, Associated Press Writer
On Wednesday August 26, 2009, 7:40 am EDT
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KUALA LUMPUR, Malaysia (AP) -- Government spending helped lift Malaysia out of recession in the second quarter amid signs of stabilization in the world economy.
Gross domestic product expanded 4.8 percent from the first quarter following contractions in the previous two quarters -- the technical definition of a recession -- the central bank said Wednesday.
The economy, battered by the downturn in global trade, was kick-started by government pump priming that included new spending of 67 billion ringgit ($19 billion). Higher private consumption contributed as well, Bank Negara Malaysia said.
Other heavily export-dependent Asian economies including Japan, Singapore and Thailand also broke out of recession in the latest quarter after getting a lift from government stimulus.
"There are increasing signs that conditions in the global economy are stabilizing," said Bank Negara Governor Zeti Akhtar Aziz.
"The expectation remains that the domestic economy will improve in the second half of the year, to be supported by a recovery in domestic demand following improvements in labor market conditions, as well as business and consumer sentiments," she said.
Zeti said the government's forecast for the economy to shrink between 4 percent and 5 percent this year will be upgraded when the 2010 federal budget is tabled in October.
The economy shrank 3.9 percent from a year earlier in the second quarter, an improvement from a 6.2 percent dive in the first quarter. GDP contracted 5.1 percent for the first half of the year.
"I think we have gone through the worst," said Wan Suhaimi Saidi, economist with Kenanga Investment Bank.
He said the second quarter data was better than market expectation and predicts a small contraction of 1.3 percent for 2009.
Bank Negara said the manufacturing sector shrank 14.5 percent from a year earlier, as electrical and electronics exports remained weak amid slow global demand.
But it said the construction sector rebounded, expanding 2.8 percent as the industry benefited from projects under the government's stimulus plan. The agriculture and services sectors also grew.
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