12 Jul 2013 11:19

KUALA LUMPUR, July 12 (Bernama) -- Domestic activity in Malaysia is expected to be solid and export demand likely to pick in the second half of the year, Ernst & Young Advisory Services Sdn Bhd said today.

The company, which is a member of the global EY organisation, said that recent weeks have witnessed a reversal of portfolio flows from developed markets to rapid-growth markets as investors reassessed risks relative to prospects in advanced economies.

EY said Malaysia has also been impacted by subdued growth prospects, as challenging external conditions led to a sharp slowdown in gross domestic product growth to 4.1 per cent in first quarter 2013 from 6.5 per cent in fourth quarter 2012.

It said net exports subtracted significantly from annual growth while government spending was surprisingly weak.

Malaysia Markets Leader at EY, Azwan Baharuddin, said EY expected soft external conditions to lead to another quarter of modest growth in the second quarter, but expected a pickup in the second half of the year, putting Malaysia at a growth rate of 4.7 per cent, lower than what was previously forecast.

"However, we expect stronger growth in 2014 as domestic demand and world trade strengthens," he said in a statement here today.

EY viewed that economic expansion in the medium term was also expected to be significantly higher, driven by strong investment growth and supported by the various economic programmes under way.

In order for the Malaysian economy to achieve growth of four per cent in the longer term, it will be crucial for the government to consolidate and push forward its reform agenda.

"Malaysia has benefited from a number of advantages in the past, and remains competitive by embracing the volatility of external market conditions as the ‘new normal', and adapting to ongoing ups and downs," he said.

Azwan said future plans for growth, such as the economic transformation programme, must likewise take into account these changes, and be implemented cohesively in order to meet its objectives. -- BERNAMA