IMF Sees Malaysia Growing 5% Amid Potential Election Volatility

Malaysia’s improving exports and domestic demand will help the economy expand 5 percent this year, even as general elections may fuel market volatility, according to an International Monetary Fund staff forecast.

The national vote, which must be held by late June, is among risks to the country’s outlook, IMF economists said in the report assessing the country’s economy released in Washington late yesterday. The main threats to growth are external, including a slowdown in China, it said.

“The next general election must be held by June 2013, but has been expected since 2011, leading to a pre-election political climate for the past two years or so,” the IMF staff wrote. The elections “could lead to some market volatility,” they said.

Malaysia’s economy grew at the fastest pace since 2010 in the three months through December from a year earlier as Prime Minister Najib Razak boosted spending ahead of the ballot. Najib, whose ruling coalition won the 2008 vote by its narrowest margin in five decades, must dissolve parliament by April 28 for polls to be held within 60 days.

The IMF growth forecast is in line with the government’s prediction of 4.5 percent to 5.5 percent.

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