A bit of negative news as GDP was down to 4% in quarter two 2011, down from 4.6% in quarter one 2011.  Consumer Price Index (CPI) increased to 3.4% in July and averaged 3.1% for Jan-July 2011 period.  Transport, Food and non-alcoholic beverages indices saw increases which contributed to the rise in CPI.

 However, PM Najib is confident that GDP target of 5 t0 6 % can be reached:

Datuk Seri Najib Razak remains hopeful over the country’s economic outlook for the year although Malaysia chalked its fifth consecutive decline in GDP growth last quarter, pointing out today that inflation has remained “manageable” and the budget deficit target “on track”.

The prime minister told a brief press conference here today that there were no plans to revise Putrajaya’s 5 to 6 per cent GDP (gross domestic product) forecast although growth had decelerated to its slowest pace of 4 per cent since the 2009 recession.

But Najib echoed Bank Negara governor Tan Sri Zeti Akhtar Aziz’s views yesterday that while stronger growth is expected in the second half of the year, Malaysia’s GDP would likely be “closer to 5 per cent”.

“We have already said our estimate for this year is 5 to 6 per cent. But we estimate it will likely be closer to 5 per cent.

“The world economy is very volatile and uncertain so it is hard to fix a number for an estimate. We decide according to a range and the range is 5 to 6 per cent so we will retain this,” he told reporters after chairing a National Finance Council meeting at the Finance Ministry.

The prime minister said the government was still on track with its target to reduce the fiscal deficit to 5.4 per cent of the GDP this year.

“Deficit, so far so good. In a sense that our commitment to reduce deficit from 5.6 per cent to 5.4 per cent is on track,” he said.

The Najib administration aims to trim the government’s fiscal deficit, which hit a 20-year high of seven per cent in 2009, from 5.6 per cent last year to 5.4 per cent.

“Inflation too is still manageable. Latest figures showed a drop.

“Steps taken, such as controlling and reducing the price of chicken, have affected the inflation rate. We hope to record a low inflation rate while at the same time see a robust economy,” he said.

The other articles:

Malaysia’s economic growth decelerated to its slowest pace of four per cent since the 2009 recession as the country was hit by a slowdown in external demand and a moderation in government spending, Bank Negara said today.

This was the fifth consecutive decline in quarterly growth and down from the 4.6 per cent growth registered in the first quarter of this year.

Bank Negara governor Tan Sri Zeti Akhtar Aziz added, however, that stronger growth is expected in the second half of the year and that while there is no revision to the 5-6 per cent growth target for the year, it will “very likely be closer to 5 per cent.”

Zeti said that the nation’s economic fundamentals were still strong with a 5.2 per cent growth in domestic consumption, low unemployment and low levels of impaired loans at only two per cent.

Domestic consumption growth was down, however, from 6.9 per cent in the first quarter due to public sector spending growth falling from 8.9 per cent to four per cent.

Private sector consumption growth, meanwhile, remained fairly steady at 6.4 per cent as compared with 6.7 per cent in the first quarter.

Net foreign direct investment (FDI) rose to RM6.2 billion in the second quarter from RM4 billion in the first quarter thanks to an improved investment climate, which led to an increase in domestic private sector investment, said Zeti.

With concerns mounting over a global economic slowdown, the central bank will now have to balance the need to fight inflation while supporting economic activity in setting interest rates.

Zeti said that inflation hit 3.4 per cent in July and 3.3 per cent for the first half of the year.

She said that the central bank’s current overnight policy rate (OPR) of three per cent was still supportive of economic growth.

The Malaysian economy grew 7.2 per cent in 2010 as it rebounded from the global economic slowdown in 2009.

The global economy this year, however, has been shaken by the spread of the euro zone debt problem to Italy and Spain and by fears that the recovery of the US economy may be faltering.

Share market investor confidence also slumped in recent weeks after Standard & Poor’s cut the credit rating of the world’s biggest economy and the debt crisis in Europe threatened to escalate.

Reflecting the fears of slower economic growth, Bank Negara has so far raised borrowing costs only once this year to three per cent as compared with three increases in 2010 despite inflation hitting its highest level in two years in June.

source: http://www.themalaysianinsider.com/malaysia/article/gdp-growth-slows-to-4pc-as-global-economy-falters/

The Consumer Price Index (CPI) for the month of July rose 3.4 per cent to 103.4, from 100.0 recorded in the same month last year.

It was up 0.2 per cent from June this year.

National news agency, Bernama, carried a statement by the Statistics Department in which it announced that the CPI was up 3.1 per cent to 102.7 for the period of January-July 2011, compared with 99.6 registered in the same period last year.

Further, the index for Food & Non-Alcoholic Beverages and Non-Food for July 2011 showed increases of 4.9 per cent and 2.7 per cent respectively when compared against the same month in 2010.

In June, the index for Food & Non-Alcoholic Beverages and Non-Food increased by 0.4 per cent and 0.1 per cent respectively.

For period of January-July 2011, the index for Food & Non-Alcoholic Beverages and Non-Food increased by 4.6 per cent and 2.5 per cent respectively against the previous corresponding period.

The 3.1 per cent increase in CPI for January-July was the result of increases observed in the indices of all the main groups except for Clothing & Footwear (-0.4 per cent) and Communication (-0.1 per cent).

The Statistics Department said key increases among these main groups with high weights were Transport (+5.0 per cent); Food & Non-Alcoholic Beverages (+4.6 per cent); and Housing, Water, Electricity, Gas & Other Fuels (+1.6 per cent).

source: http://www.themalaysianinsider.com/malaysia/article/july-saw-cpi-rise-3.4pc/