GDP to shrink 3.1% (Edge)

The weak closing on Wall Street will weigh down investors' sentiment in an already cautious market while focus will be on the UMNO general assembly this week.

The recent weak economic data, which indicates a recession this year, would also make investors reluctant to make fresh bets on March 23.

Credit Suisse said in a recent report that it expects real GDP to shrink 3.1% in 2009 due to Malaysia’s sizable trade exposure, with over 40% of domestic value-added (GDP) in exports.

Adverse second-round effects from the trade pose additional risks to growth. The fall in oil and non-oil revenues could push the fiscal deficit above 8% of GDP in 2009 and 2010, and impair Malaysia’s sovereign credit ratings.

"Capital outflows should stabilise, while policy will remain biased to allow the ringgit to gradually depreciate in line with regional currencies. We expect Bank Negara Malaysia to cut the overnight policy rate to 1.5% in the remainder of 2009, if not to 1%,depending on upcoming G3 data,"it said.