[2425] I don’t think the second half will be stellar

There is an expectation that the second half of the year will boost the annual GDP growth for Malaysia to make up for the relatively weak first half. That was a reasonable expectation to have in the first half of the year but with only less than four weeks to go before the final quarter of 2011 is here, it is becoming increasingly untenable.

The basis for the optimistic second half expectation has been the planned construction boom as a result from the Najib administration’s Economic Transformation Program. A friend told me that it is to rival the construction boom of the 1990s.

From casual observation, there is a slow start to the boom. If the casual observation proves correct, the boom may yet pick up full steam in the fourth quarter but I doubt the fourth quarter alone will be sufficient to bring respectability to the whole year growth number, at which I define respectability as at least meeting the minimum target of 5% set by the Najib administration.

When the boom actually begins, there will be a question of lag. The economic expansion arising from multiplier effect will be even slower to hasten growth, adding to the issue of lag. Even if the boom had actually begun, the length of the lag is unclear and it is possible that the lag is still ongoing. It is hard to know this conclusively before November, when the actual third quarter result of the Malaysian real GDP will be released.

There are question marks on both domestic and foreign demands. Foreign demand on domestic goods is substantial. It is so substantial that I have made the case that the Malaysian recession and the subsequent recovery has been primarily caused by the global economy before.

The global economy is not doing so well at the moment. If there was a global central planner, then that planner had yet to make up his mind whether to grow or contract the world’s economy. There have been renewed talks of a double dip but truly without projecting the future, I think current statistics are giving confusing signal at the moment. Some statistics are performing worse than before and expectation. Others are doing better.

I myself have done some rudimentary forecasts for the Malaysian real GDP. It ranges from 4.60% to 5.15%. Okay, those are the only two rough forecasts that I have calculated through two slightly different but still simple methods. There is much work to be done to improve the model and I am not very satisfied with it. It does give me a general view nevertheless.