Domestic Consumption Still Strong

KUALA LUMPUR: Domestic consumption in the country will remain strong although growth may not be in double digit next year, Second Finance Minister Tan Sri Nor Mohamed Yakcop said.

He said as the base grew bigger, growth might not “be that strong''.

“I think the domestic consumption figures are good. We are seeing double-digit figures now. However, the growth will continue to be strong because of the action that we have taken as well as the higher income,” he told reporters after the launch of Naza Group of Companies' latest car, Forza, yesterday.

Nor Mohamed reiterated that domestic consumption would continue to be a significant factor in the country's growth for many years. Private consumption for the third quarter grew to 14% from 13.1% in the preceding quarter.

Should there be a dent in growth in the US, Malaysia would not be very much affected because the country had diversified from exports to domestic consumption and investments as well as increasing exports to more countries, he said.

On rising crude palm oil (CPO) and crude oil prices, the minister said this would benefit the country.

Nor Mohamed did not think the CPO price was too high and felt that it would be sustained for a few more years.

“I think the price will hold and continue to be strong because of demand from the growing middle class in China and India. At present, their per capita consumption of palm oil is low,” he added.

On the country's budget deficit, Nor Mohamed said this would be reduced to 3.2% of gross domestic product (GDP) this year from 3.3% last year. The Government is targeting a deficit of 3.1% of GDP next year.

The CPO futures contract has crossed RM3,000 per tonne, having gained more than 50% over the past year. The CPO physical price for December south was traded at RM2,910 on Friday, while the benchmark contract for March 2008 delivery last traded at RM2,930.