IN OCTOBER last year, when the government projected economic growth of 5-6 per cent for the country for 2012, it was met with a lot of criticism and pessimism.
Many regarded it as too optimistic, in the face of the gloomy world economic outlook, especially with eurozone still in the thick of its debt crisis.
Many research houses, in fact, had lowered their growth projections for Malaysia to as low as 3.6 per cent. Due to the uncertainty brought about by the external environment, most of these researchers and market analysts expected businesses to cut spending, while some were then still sceptical that the Economic Transformation Programme (ETP) would come onstream so soon.
More than six months later, the mood has somewhat changed. Suddenly the government's projection is looking quite realistic now. The International Monetary Fund (IMF), which surely can garner more resources than local banks and research houses, had on Wednesday revised upwards its growth forecast for Malaysia to 4.7 per cent from 4.4 per cent.
Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz yesterday, although as cautious as ever, also painted a more optimistic picture. She told reporters that the country's gross domestic product (GDP) growth for 2012 is likely to hit the upper end of the four to five per cent projected earlier by the central bank.
The optimism stems from the encouraging figures that were churned out for the first quarter. The trade numbers, for instance in Zeti's words, have improved beyond expectations. For February, export and import growth expanded by 14.5 per cent and 18 per cent year-on-year, respectively, from 0.4 per cent and 3.3 per cent previously, while the industrial production index (IPI) growth came in at 7.5 per cent year-on-year for the month.
Touch wood, if the upward trend continues, it will likely make the government's projection of 5-6 per cent growth more achievable.
Economic figures aside, market sentiments remain robust with the FBM KLCI breaching the 1,600-mark for the first time late last month. Many research houses have predicted that happening this year but most will admit it came sooner than expected.
The announcements relating to tender awards that have come furiously since early this year, especially relating to the Mass Rapid Transit project in the Klang Valley, have helped to boost sentiments. Many now are not only convinced but seeing for themselves that projects promised by the government under the ETP are coming on stream as planned. This to them will mean more money pouring into the economy, thus improving consumption.
While external weaknesses are still expected to remain the main drag to the economy, domestic demand, especially in private consumption and investment, would support GDP (gross domestic product) growth in the quarters ahead.
Apart from the strong domestic demand, some research houses are now anticipating some stability in the eurozone economies by the end of the year.
A stronger US economy in the coming quarters is also expected, while moderating inflationary pressures would also be positive for the domestic economy in 2012. It looks like many now would have to revise upwards their growth forecast for the Malaysian economy.