Thai, Malaysian Growth Probably Slowed Last Quarter

Thailand and Malaysia may report economic growth slowed last quarter as manufacturing output moderated after surging during the recovery from the global financial crisis.

Malaysia’s gross domestic product increased 4.6 percent in the three months through December from a year earlier, after a 5.3 percent expansion in the previous period, according to the median forecast of 14 economists surveyed by Bloomberg News. The Thai economy grew 4.1 percent in the same quarter, according to a separate survey of 12 economists.

The slowdown may be insufficient to damp pressure for higher interest rates and stronger currencies due to accelerating inflation. Nations from Indonesia to China have tightened monetary policy this year, and the International Monetary Fund says the region may need to raise rates further to limit the risk of overheating.

“The acute issue is inflation and the growth momentum going forward should give policy makers confidence in tackling the elephant in the room,” said Wellian Wiranto, an economist at HSBC Holdings Plc in Singapore. “Inflation won’t go away anytime soon.”

Bank Negara Malaysia will release the fourth-quarter numbers at 6 p.m. local time tomorrow, while Thailand’s state planning agency will announce the data at 9:30 a.m. on Feb. 21.

Domestic Demand

Thailand’s central bank last month estimated Southeast Asia’s second-biggest economy expanded 8 percent in 2010, which would be the fastest pace in 15 years, and forecasts 3 percent to 5 percent growth in 2011.

Malaysia probably grew about 7 percent last year, according to central bank Governor Zeti Akhtar Aziz, an expansion that would be the fastest since 2000.

Prime Minister Najib Razak forecasts growth of as much as 6 percent this year, which the central bank says will be underpinned by domestic demand and exports. The monetary authority left borrowing costs unchanged at 2.75 percent last month after three increases in 2010.

Malaysia’s growth may beat estimates this year as surging palm oil and rubber prices create a “commodity bonanza” that will benefit banks, builders and property stocks, according to Credit Suisse Group AG analyst Stephen Hagger. The nation’s growth has lured funds and investment and pushed the ringgit up more than 11 percent against the dollar in the past year.

“The upswing will probably gain more traction in 2011 and the central bank will resume its monetary policy tightening sooner or later,” said Vishnu Varathan, an economist at Capital Economics (Asia) Pte in Singapore.

Rising Wages

In Thailand, where Prime Minister Abhisit Vejjajiva raised the minimum wage last month and plans to increase the salaries of civil servants in April, consumer confidence is rising. Central Group, which controls Thailand’s biggest operator of shopping malls, this month said it plans to increase investment by 57 percent because of rising local demand.

A pick-up in consumption, along with rising wages and higher commodity costs, is spurring inflationary pressures, which Bank of Thailand Governor Prasarn Trairatvorakul has referred to as the “key risk.” The central bank increased its benchmark interest rate for the fourth time in seven months on Jan. 12 to 2.25 percent, and Prasarn has said borrowing costs need to rise to damp quickening consumer-price growth.

“The economic growth momentum is still solid, supported by exports, high farm income and recent wage increases,” said Thanomsri Fongarunrung, an economist at Phatra Securities Pcl in Bangkok. “Given the strong economic performance and heightening risks to inflation, we expect the central bank to raise rates by a further 50 basis points in the first half of the year.”

Political Risk

Abhisit plans to hold an election by the end of June as he moves to ease political turmoil marked by demonstrations that have resulted in about 100 deaths since the last vote in 2007. There is still “high uncertainty” about Thailand’s political situation, Thanomsri said.

Thailand, a manufacturing base for automakers including General Motors Co. and Toyota Motor Corp., saw foreign direct investment fall 33 percent to 236.03 billion baht ($7.7 billion) last year as protesters occupied a Bangkok financial area. Investment inflows into neighboring Malaysia more than tripled to $7 billion.

Singapore said today its economy expanded an annualized 3.9 percent last quarter from the previous three months, when it contracted 16.7 percent. That’s less than the 6.9 percent growth estimated by the government on Jan. 3.

Taiwan Growth

Taiwan’s economic growth slowed to 6.92 percent in the fourth quarter as exports eased after propelling the island to one of the world’s fastest expansions last year, a report showed today. The government’s preliminary estimate last month was 6.48 percent.

Indonesia’s economy may expand 6.5 percent in the first quarter from a year earlier, Bambang Permadi Brodjonegoro, head of fiscal policy at the Finance Ministry, said in Jakarta today. That compares with a 6.9 percent growth rate last quarter, which was the fastest pace in six years.

The IMF predicts developing Asia will expand 8.4 percent in 2011 and 2012, according to a report released in January.

“Although the region’s growth is expected to settle to a more sustainable pace, Asia will remain at the forefront of the global recovery,” Singapore’s Trade Minister Lim Hng Kiang said yesterday.

Singapore’s export growth more than doubled in January amid strengthening demand for electronics and pharmaceuticals, a report showed today. Non-oil domestic exports climbed 20.9 percent from a year earlier, after a 9.4 percent gain in December, the trade promotion agency said.

To contact the reporters on this story: Shamim Adam in Singapore at sadam2@bloomberg.net; Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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