| KUALA LUMPUR
KUALA LUMPUR Rebounding exports, helped by a weakening currency and brighter global demand, likely kept Malaysia's economic growth steady in the last three months of 2013, making up for a tail-off in domestic demand as the government tightens fiscal policy.
After a weak first half, the export sector picked up towards the end of the year as a global recovery raised demand for the Southeast Asian exporter's key shipments of electronics and petroleum products. But the pace over the full year will likely have slowed from 2012.
Malaysia's economic fundamentals have come under greater scrutiny since portfolio funds started shifting capital to developed markets in the wake of U.S. monetary tapering. While the pressure on emerging market countries has eased lately, the country's high debt burden and fragile ringgit are still a concern.
Fourth-quarter gross domestic product, due on Wednesday afternoon, was forecast to grow 4.8 percent from a year earlier, a Reuters poll of economists showed. The forecasts ranged from 4.0 to 5.3 percent.
Full-year growth was seen at 4.6 percent, down from 4.7 percent in a November poll and compared with 5.6 percent in 2012. Most economists expect growth to pick up to between 5.0 and 5.5 percent this year.
Bank Negara Malaysia has noted that "broader signs of improvement" have emerged in developed economies and that Malaysia's robust growth momentum was expected to be sustained this year thanks to a pick-up in exports.
December exports jumped 14.4 percent from a year earlier, easily beating economists' expectations. Exports to China, Malaysia's largest trade partner, surged 37.1 percent. Data on Monday showed annual industrial production rose 4.8 percent, slightly below expectations.
While the export picture is brightening, Malaysia's consumers are feeling the pinch from the government's cuts to fuel and food subsidies late last year, which are feeding through into higher prices. The consumer price index in December rose 3.2 percent from a year earlier, its highest since November 2011.
"As the pain from higher inflation feeds through the system, household spending growth will likely soften significantly, leaving exports and investment in the drivers' seat supporting GDP growth in 2014," said Santitarn Sathirathai, an economist with Credit Suisse in Singapore.
The ringgit, down 1.7 percent against the dollar so far this year, is the worst performer among major Asia currencies this year. It is seen as one of the most vulnerable Asian currencies to Federal Reserve's "tapering" policy due to its high correlation with U.S. Treasury yields.
The fall has come despite the government's steps last year to address growing concerns over its fiscal deficit by slashing some subsidies and could raise pressure on the central bank to increase interest rates later this year.
Malaysia's central bank kept its benchmark interest rate steady at 3 percent last month, but signaled more optimism over the country's growth prospects.
Bank Negara has held the rate at 3 percent since mid-2011, but the acceleration in inflation and expected pick-up in exports have prompted many economists to predict a hike of at least 25 basis points this year.
($1 = 3.34 Malaysian ringgit)
(Reporting by Hawa Semasaba; Editing by Stuart Grudgings and Jacqueline Wong)