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.