Boston, MA -- (SBWIRE) -- 06/25/2013 -- Growth To Fall In Election Year

We have again raised the number for Malaysian economic growth last year, but we still expect something of a slowdown in 2013. After a strong fourth quarter, marked by resilient private consumption at home, coupled with a recovery in external demand, Malaysian full year GDP growth was 5.6% (higher than our 4.2% estimate in our last quarterly report). But looking forward, we have only edged up our 2013 forecast to 4.6% growth (against 4.5% earlier). A number of factors explain our somewhat cautious position. First, although our base scenario is for the ruling Barisan Nasional (BN) coalition to win the general elections (in May), thereby providing economic policy continuity, we also recognise that the outcome is not assured and that the opposition Pakatan Rakyat (PR) is likely to mount the strongest challenge in decades. This means that political risk will be higher in mid-2013 and investment inflows, which have underpinned growth so far, may ease back. Second, the fiscal deficit has been widening and a new administration will need to carry out something of a correction that will dampen the growth rate. And in third place, even though we see net exports swinging round to make a positive contribution to GDP, our view is that growth in China will moderate in the second half of this year, meaning that external demand for Malaysian exports will lose some impetus. On the medium term - the next five years - we expect Malaysian economic growth to average 4.3% per annum. The real value of foreign trade will grow at an annual average of 3.8% per annum over the same period.

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Relative to our previous quarterly shipping report, we have now eased back our forecasts for the country's major ports (Port Klang and Port Tanjung Pelepas). Bulk tonnage and container traffic will rise by between 2% and 5% this year, and we now expect most ports to lag, rather than lead GDP percentage growth.

Headline Industry Data

- The real value of Malaysia's total trade will rise by a predicted 3.7% in 2013, picking up from the estimated 2.3% expansion experienced in 2012.
- Total cargo volume handled at Port Klang will rise by 2.9% to 203.64mn tonnes in 2013, while volume at the Port of Tanjung Pelepas will rise by a marginally higher 3.1% to 122.81mn tonnes.
- Rail freight volume is projected to rise 1.6% to 6.242mn tonnes in 2013 and to average 3.1% annual growth in the five-year period to 2017.
- Air freight volume is set to grow by 1.8% to 926,810 tonnes in 2013, with a little faster than the growth rate achieved in 2012.

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