20100514 1541 Malaysian Economic News.

Gross domestic product (GDP) grew 10.1% in 1Q10 (4.4% in 4Q09), the highest registered in 10 years, when compared with the 11.7% registered in 1Q00. On the supply side, all major economic sectors recorded robust growth, particularly the manufacturing sector (+16.9%).The services sector also registered a strong performance of 8.5%, followed by the construction sector (8.7%), agriculture sector (6.8%) while the mining sector turned around to register 2.1% growth.

• On the demand side, growth during the quarter was underpinned by strong domestic expenditure due to sustained expansion in private and public consumption at 5.1% and 6.3% respectively. 
• Malaysia is on track to reduce its budget deficit to 5.6% this year (7.0% in 2009), said PM Datuk Seri Najib Tun Razak.
• The country's GDP forecast for the year was also revised during the presentation of the fiscal budget in October while Najib noted that 6.0% growth is achievable. (Bernama) 

Bank Negara Malaysia (BNM) decided to raise the overnight policy rate (OPR) by 25bp to 2.50%. This is the second interest rate hike for the year. The floor and ceiling rates of the corridor for the OPR are correspondingly raised to 2.25% and 2.75% respectively. (BNM, Financial Daily)

Central bank Governor Zeti Akhtar Aziz said the next few quarters would show an improvement in economic growth but may not post such a huge yoy increase of 10.1% seen in 1Q10. “What is more important are actual economic activity increases and we are projecting that growth qoq will improve,” she added. (StarBiz)

The Malaysian Ringgit is “retracing back” to previous levels after depreciating “very significantly” in 2008 and part of 2009, central bank Governor Zeti Akhtar Aziz said. “We believe different industries will benefit from the movements in the exchange rate. This is something we highlighted to manufacturers several years ago, that they have to manage increased volatility of the exchange rate and they should not rely on the exchange rate to gain their competition,” Zeti noted. (Bloomberg)

Central bank Governor Zeti Akhtar Aziz said volatility in the financial market could be expected as a result of the development in Europe and other advanced economies. “We should be abale to absorb this volatility. At the macro level, we have strong reserves, strong balance of payment, current account in surplus, an external debt which is low, high savings rate as well as ample liquidity in the financial sector,” she said. (BT)

The new basic motor insurance to replace the existing third-party motor insurance will be implemented by early next year. The scheme comes with a liability limit of up to RM2m ad settlement time is targeted to be between two and four weeks. A Finance Ministry source told that the Government would have to subsidies the new scheme if the current premiums were to remain. (The Star)