The first half of the year will be solid as the momentum we have seen in the last two quarters will carry growth over to the first half of 2006.

It should not be introduced at high levels, where it will shock the economy. Instead, the GST should be gradually eased in and the list of taxable goods expanded over time.

This is the start of a hiking cycle. A series of small hikes will follow until inflation falls below 3%.

These indicators tend to have a lead-lag of three to six months. We still may have sufficient strength in exports in the first quarter and even into the second.

Inflation is still higher than nominal interest rates, and this is a clear sign that monetary conditions are highly accommodative in Malaysia and the need for interest rates to return to a neutral level.

Clearly this is detrimental to foreign sentiment.