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November 17, 2009 14:46 PM

Malaysia Can Achieve 6 Per Cent Growth By 2012, Says World Bank

KUALA LUMPUR, Nov 17 (Bernama) -- The World Bank estimates that Malaysia's economy which now is beginning to show signs of recovery from the global slowdown will return to its potential average growth rate of six percent by 2012, thanks largely to bold structural reforms undertaken by the government.

"We anticipate that the reform momentum in Malaysia is building up and this will contribute to greater productivity growth and a new dynamism in the economy coupled with continuing improvement in the global economy, the senior economist for the World Bank's Asia & Pacific Department, Philip Schellekens said.

"There would also be a greater role for the private sector to boost underlying economic fundamentals for Malaysia's growth," he said in reference to the liberalisation initiatives in areas such as the capital market as well as banking and finance which were beginning to bear fruit.

The World Bank expects Malaysia's gross domestic product growth to expand by about 4.1 percent next year, which is significantly higher than the contraction of 2.3 percent this year, he told reporters after a seminar on "Malaysia: Productivity and Investment Update" organised by the Economic Planning Unit of the Prime Minister's Department and the World Bank here Tuesday.

However, the full positive impact on the economy would depend on how the government effectively implements the structural reforms, he said.

He said Malaysia was recovering from the economic crisis which mainly affected the manaufacturing sector.

Overall, the domestic economy managed to hold itself together although unemployment rose only slightly.

By and large, although this was one of the worst export slumps in Malaysian history, the economy remained fundamentally resilient unlike the Asian financial crisis in 1997/98," he said.

Malaysia was well-positioned to participate in the global economic recovery on the back of rising demand in China and the rest of the region as well as progressive improvement in advanced economies, said Schellekens.

As to the government's target of achieving an average annual GDP of 5.4 percent until 2020, he said: "I think this is realistic providing the government can basically pull through the various initiatives announced in revitalising the economy."

"The growth rate could be much higher if the private sector role can be revitalised," he said citing that the share of private investment to GDP before the 1997/98 crisis of about 30 percent had declined to 10-12 percent.

He said that two crucial ingredients to boost growth further were a higher skilled workforce and the capability of local companies to embrace technological innovation.

-- BERNAMA

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