Malaysia's economy expanded faster than economists expected in the first quarter as rising government spending and investment countered weaker overseas demand.The $147 billion economy added 5.3 percent from a year earlier after gaining 5.7 percent in the fourth quarter, the central bank said in a statement in Kuala Lumpur. While the pace was the slowest since a revised 5.2 percent in the third quarter of 2005.
Malaysia, among the world's top 20 trading nations, is counting on higher public spending and private investment this year to lift growth to 6 percent as a faltering U.S. economy threatens demand for goods such as Intel Corp. semiconductors and Dell Inc. notebook computers that are produced in Southeast Asia's third-largest economy.The U.S. is Malaysia largest overseas market, accounting for about a fifth of export sales. The world's largest economy grew at a 1.3 percent annual rate in the first quarter, the slowest pace in four years, after a slump in home building and a bigger trade deficit reduced growth, the Commerce Department said April 27.
The government will spend an additional 8 billion ringgit a year on the higher salaries and a doubling of cost of living allowances, helping boost growth by as much as 0.5 percentage point this year, Second Finance Minister Nor Mohamed Yakcop said May 22. He declined to say if the measures would help economic growth meet or exceed the 6 percent forecast this year.Easing inflation and higher investment approvals will help Malaysia's economy this year, the Malaysian Institute of Economic Research said April 17, when it raised Malaysia's 2007 growth forecast to 5.6 percent.The institute's consumer sentiment index rose to 124.1 in the first quarter from 110.9 in the previous three months, helped by rising stocks, higher wages and stable jobs. The business conditions index dropped to 105.5 from 107.2.