Zeti: Economic growth to moderate in 2nd half

Zeti: Economic growth to moderate in 2nd half
By Roziana Hamsawi Published: 2008/08/19

THE country's economic growth is expected to be above six per cent in the first half but will moderate in the second half, said Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz.

The second half figures will be impacted by rising energy and commodity prices.

For the year, Bank Negara's gross domestic product target is six per cent from 6.5 per cent initially.

Zeti yesterday said while the Asian region has experienced robust growth in the first half of 2008, regional economies will be affected by the number of current global developments.

"Although growth is expected to moderate, most economies will continue to see reasonable growth performance," she said in her keynote address at the Fourth Public-Private Dialogue for the Asia-Pacific Region in Kuala Lumpur.

The dialogue is organised by the South East Asian Central Banks Research and Training Centre in collaboration with Apec Business Advisory Council, the Asian Bankers Association and the Pacific Economic Cooperation Council to discuss the development of Asia's financial systems and the implementation of Basel II.

Zeti said the Asian region will continue to face inflationary pressures but this is expected to recede with the substantial correction that recently took place following the slower pace of global growth.

She added that the Asian region is expected to weather this challenging period with the growing intra-regional trade and the expansion of its economic links with Eastern Europe and Russia, the Middle East and Latin America.

She pointed out that 60 per cent of Malaysia's trade is with the Asian region while that with the US, its single largest trading partner, has declined from 25 per cent to 15 per cent over the last 10 years.

"In this environment, the implementation of Basel II presents a powerful lever for banks to significantly enhance both their long-term resilience and their competitive advantage," she said.

Zeti said to realise the full benefits from the implementation of Basel II, its multi-faceted dimensions need to be well understood and well integrated with the financial structures, institutional practices and supervisory systems.

"Emerging markets in particular will need to ensure that supervisory interpretations of the framework are contextualised to the local conditions, and the preconditions for its effective implementation are adequately developed to avoid the potential market distortions," she added.