Awwal 15, 1432 H/Feb 18, 2011, SPA -- Malaysia's economy expanded 7.2 percent last year, its strongest pace in a decade, the central bank said Friday, while warning that rising inflation is clouding the regional outlook, according to AP. Bank Negara Malaysia said growth this year will be affected by an uneven global recovery. Even though the outlook for Asia remains favorable, regional economies are being dogged by rising inflation due to higher commodity and fuel prices, it said. Malaysia's economy expanded 4.8 percent in the final quarter of 2010 from the year before, slowing for the third consecutive quarter. It grew 5.3 percent in the third quarter, 8.9 percent in the second quarter and 10.1 percent in the first quarter. The sharp rebound in annual growth came after a recession in 2009 when the economy shrank 1.7 percent. The manufacturing sector expanded at a slower rate of 6.2 percent in the fourth quarter, due to weaker exports, the central bank said in a statement. Agriculture shrank 4.3 percent due to lower palm oil production while the mining sector contracted further due to lower production of crude oil. Inflation inched up to 2 percent, from 1.9 percent in 2009. The bank said there were no plans to raise interest rates, which remained supportive of growth. AmResearch said it expects growth to moderate to 5.5 percent this year _ lower than the government's target of a 6-7 percent expansion. It said the economy is likely to slow in the first half of the year before picking up in the second half as work starts on infrastructure projects. Despite rising inflation in the region, it said in a recent report that consumer prices in Malaysia remained tame because of continued subsidies, price controls and an appreciating currency. The ringgit rose by more than 10 percent against the dollar last year. With moderating growth this year, AmResearch said it expects interest rates to remain steady with a potential for a small hike in the last quarter. Bank Negara has raised its overnight policy rate _ used by commercial banks to set lending rates _ three times since March last year to its current level of 2.75 percent. This still remains low compared with 2008 when it was 3.5 percent.
