Economy of Malaysia

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The Malaysian Economy in 2007
3 8 9 11 22 25 31 44 The International Economic Environment in 2007 Overview Domestic Demand Conditions Sectoral Review White Box: Development of a Vibrant and Sustainable Microfinance Industry Prices and Employment External Sector White Box: Development of Small and Medium Enterprises

The Malaysian Economy in 2007
THE INTERNATIONAL ECONOMIC ENVIRONMENT IN 2007 Global growth was strong in 2007, driven by above-trend growth in most industrial economies and buoyant growth in emerging market economies, despite moderation in the United States (US) economy, higher oil prices and the onset of financial market turbulence in the second half-year. The economies of the People’s Republic of China (PR China), India and other large emerging economies such as Brazil and Russia increased their contribution to global growth, spurred by strong consumption and rising investment activity. Recordhigh commodity prices also buoyed growth in many resource-producing economies. Benefiting from these trends, the strong growth momentum in the Asian region was further supported by rising domestic demand, which more than compensated for some moderation in electronics exports. In contrast, downside pressures on the US economy increased towards end-year, affected by the emergence of the subprime mortgage problem and further downturn in the US housing sector, with its spillover to the global financial markets. remained supported throughout the year by favourable labour market conditions as reflected in positive job creation, low unemployment rates and favourable income growth. This was achieved despite the continued slowdown in the housing market, where house prices declined across the country amid elevated levels of inventory, falling home sales and rising foreclosures. However, by the fourth quarter, economic growth moderated significantly, reflecting in part the more significant implications from the ongoing correction in the housing market and the emerging impact from financial market turbulence. Among the other major industrial countries, above-trend growth was sustained in 2007. Growth in Japan was supported by favourable export performance and investment activity linked Table 1.1 World Economy: Key Economic Indicators

Real GDP Growth (%) 2006 World Growth World Trade Major Industrial Countries United States Japan Euro Area United Kingdom1 East Asia Asian NIEs Korea Chinese Taipei Singapore Hong Kong SAR2 People’s Republic of China ASEAN3 Malaysia Thailand Indonesia Philippines India4, 5 1 2 3

Inflation (%) 2006 2007e -

2007e 4.7 6.6

4.9 9.2

Global growth was strong in 2007, driven by above-trend growth in most industrial economies and buoyant growth in emerging market economies, despite moderation in the US economy, higher oil prices and the onset of financial market turbulence in the second half-year The US economy displayed an uneven growth trend in 2007, but overall expanded at a more moderate pace than in 2006. After a below-trend first quarter due mainly to the weaker housing market, growth in the second and third quarters recovered to some extent, supported by nonhousing investment activity and net exports that benefited from robust global growth and a weaker US dollar. Meanwhile, consumption spending

2.9 2.2 2.8 2.8 8.1 5.4 5.0 4.9 8.2 7.0

2.2 2.0 2.6 3.1 8.4 5.5 4.9 5.7 7.7 6.3

3.2 0.3 2.2 2.3 2.6 1.6 2.2 0.6 1.0 2.0

2.9 0.1 2.0 2.4 3.7 2.2 2.5 1.8 1.7 2.0

11.1 5.9 5.9 5.1 5.5 5.4 9.6

11.4 6.3 6.3 4.8 6.3 7.3 8.7

1.5 6.7 3.6 4.6 13.1 6.2 4.8

4.8 3.4 2.0 2.0 6.3 3.0 4.8

Inflation based on Eurostat’s harmonized index of consumer prices Inflation refers to composite price Includes Singapore 4 Real GDP growth refers to fiscal year 5 Inflation refers to wholesale price index e Estimates Source: International Monetary Fund, National Authorities, BNM estimates.

3

Annual Report 2007

to growing demand from PR China, which has now surpassed the US as Japan’s largest...
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