Malaysia Sticks To 6% Growth Forecast For Economy

KUALA LUMPUR: Malaysia is sticking to its forecast of 6 percent growth for the economy this year and 6 to 6.5 percent next year.

Rising oil price help and hurt Malaysia. As a net exporter of crude oil, the country stands to gain 250 million ringgit (US$71 million; euro49 million) for every US$1 (euro0.7) rise in prices, said Second Finance Minister Nor Mohamed Yakcop.

At the same time, the government will have to pay higher subsidies for retail fuel.

But the net effect is a positive gain, he said.

"In the immediate term, there is no impact on our 2007 forecast of 6 percent,'' Nor Mohamed told reporters on Thursday.

He said he is confident that the 2008 growth target could also be achieved as the government had forecast a range of 6-6.5 percent to factor in uncertainties such as high oil prices.

Nor Mohamed declined to say if the government would raise controlled retail fuel prices if the oil rally continues.

Crude oil prices rose to a new record above US$96 a barrel Thursday.

Malaysia heavily subsidized fuel prices, which are among the lowest in Southeast Asia.

In the long run, Nor Mohamed said, the government is "somewhat concerned'' that sustained high oil prices could cause a downturn in developed countries and this could hurt Malaysia's trade-driven economy.

But he said the government has taken measures to boost domestic consumption and investment to ensure the country isn't overly dependent on exports.

Tourism and investment from the Middle East are also expected to help spur Malaysia's growth, he added. - AP