Malaysia says no extra fiscal stimulus for economy

Malaysia has no plans for now to roll out any extra fiscal stimulus for its economy, with growth on track to meet the official 6-6.5 percent target this year, a government minister said on Monday.
Asian exporter Malaysia is facing the double headwinds of slowing US demand and rising domestic inflation, sparking fears that the $149 billion economy could slide into a sharp slowdown. But Second Finance Minister Nor Mohamed Yakcop on Monday downplayed concerns of a downturn. "Not yet," he told reporters, when asked if the government was planning any extra fiscal stimulus to help Malaysia weather a rough patch in the global economy.
"The fiscal stimulus that we have in the various budgets - the last few budgets - there are very strong fiscal incentives and they are already showing good results in the economy." He said economic growth would be supported by domestic consumption, government spending and a boom in commodities prices.
Malaysia is the world's second-largest producer of crude palm oil and a net crude oil exporter. Helped by state spending through various multi-billion dollar development blueprints, the Southeast Asian economy has defied expectations of a slowdown, rising at its fastest annual pace in more than three years in the third quarter.
However, inflation posed a challenge for the economy, Nor Mohamed said. "It is true that the world is seeing higher and higher food prices and there is a commodities boom which I think will continue despite the slight downturn in the US," he said.
"So we have to really manage the economy in such a way that inflation does not become a major problem. We will take whatever action we can to make sure that the inflation situation remains under control."
He did not elaborate. Malaysian annual inflation hit a 9-month high of 2.3 percent in November, and is expected to edge higher due to increasing food prices and a likely cut in fuel subsidies this year. The government expects inflation to average 2-2.5 percent in 2008, the same as the official forecast for 2007.