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WORLD BANK SEES 4.4 PCT FALL IN MALAYSIA'S GDP

Bernama - Monday, June 22

BANGKOK, June 22 (Bernama) -- Malaysia's real gross domestic product (GDP) is expected to fall by 4.4 percent this year before recovering to 2.2 percent next year and 5.3 percent in 2011, the World Bank said in its report on the global economic situation.

The report, Global Development Finance 2009: Charting a Global Recovery, the World Bank said the 4.4 contraction was a result of high and undiversified dependence on exports of electronics, oil and crude palm oil, all of which were falling sharply, coupled with its relatively small domestic market.

The bank said in Thailand, a slump in exports, exacerbated by heightened political uncertainty, was set to cause output to contract by 3.2 percent, following the slowest expansion in developing East Asia during 2008. It is likely to post 2.2 percent growth in 2010 and 3.1 percent in 2011.

It said in both countries, among the region’s other middle-income countries, output was projected to contract in 2009 due to a fall in exports and investment.

Both Indonesia and Vietnam are projected to register 3.5 percent growth in 2009 and 5.0 percent next year, while the Philippines would see 0.5 percent fall this year, before climbing to 2.4 percent the following year.

The bank said said thanks to China, the growth in developing East Asia and the Pacific would be the fastest among the world’s regions and was projected at five percent. China is expected to grow faster than most other countries this year at an estimated 9.3 percent but was likely to drop to 8.3 percent next year.

It said excluding China, the GDP in the region was expected to decline by 0.2 percent in 2009, the slowest since the crisis of the late 1990s.

According to the report, amid global economic recession and financial market fragility, net private capital inflows to developing countries fell to US$707 billion in 2008, a sharp drop from a peak of US$1.2 trillion (US$1=RM3.50) in 2007.

International capital flows are projected to fall further in 2009, to US$363 billion, it said.

The report warned that the world was entering an era of slower growth that would require tighter and more effective oversight of the financial system, saying that global growth was also expected to be negative, with an expected 2.9 percent contraction in 2009, before rebounding to two percent in 2010 and 3.2 percent by 2011.

"The need to restructure the banking system, combined with emerging limits to expansionary policies in high-income countries, will prevent a global rebound from gaining traction," said Justin Lin, World Bank chief economist and senior vice president, development economics,

He said developing countries could become a key driving force in the recovery, assuming their domestic investments rebound with international support, including a resumption in the flow of international credit.

Hans Timmer, director of the bank’s Prospects Group, said to prevent a second wave of instability, policies had to focus rapidly on financial sector reform and support for the poorest countries. -- BERNAMA

AR THS

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