Review of the Malaysian economy 1988

Abstract

The Malaysian economy in the second quarter of 1988 shifted into higher gear with a growth of 10.6 per cent to average 9 per cent for the first half of the year. For the year as a whole, MIER projects a growth of 8.2 per cent for 1988 (compared to the Treasury's Budget estimate of 7.4 per cent; see Figure 1). This estimate is 1.2 per cent higher than what we anticipated in our July 1988 revision. The current economic upswing is largely due to buoyant external demand for Malaysia's manufacturing exports which was expected to accelerate by 34.9 per cent to reach $27.3 billion and firmness in non-oil commodity prices (especially palm oil, rubber, tin and sawlogs). Aside from the favourable external conditions, the higher output growth is further boosted by a remarkable turnabout in domestic demand, particularly private sector expenditures. In the third quarter of 1988, MIER's Index of Consumer Sentiments (ICS) soared to a new height of 106, gaining 12 points over the second quarter level of 94, reflecting widespread growing consumer confidence in the strength of the current expansion. Parallel to the jump in the index, 30 thousand units of passenger cars were sold during the first seven months of the year, despite the astronomical increase in prices. Reflecting the optimism in the investment climate, proposed investments for the first ten months of the year increased to $8.12 billion compared with only $2.6 billion for the same period last year. The rubber products sector topped the number of projects proposed followed by electrical and electronic sector, textile products sector, wood and wood-based products sector, food manufacturing sector, chemical and chemical products sector, furniture, furnishing, and household equipment sector and transport equipment sector. Along with this, foreign capital investment in the manufacturing sector increased substantially, by 240 per cent to reach $3.5 billion for the first nine months of this year as compared to the same period last year.