KUALA LUMPUR, May 12 — Weak domestic consumption and slowing trade and investment are expected to have pulled down Malaysia’s first-quarter economic growth to its slowest pace in years.

The median forecast in a Reuters poll of economists is for annual growth during the first three months of 2016 to slow to 4.1 per cent from 4.5 per cent in October-December.

If the rate reported on Friday turns out to be 4.1 per cent, January-March will be the first period in three years to have growth of less than 4.3 per cent.

The deceleration is likely a result of the “sequential decline” in exports, which outpaced that of imports, HSBC said in a note.

“Domestic demand was also likely slower,” the bank said, adding that retail indicators remained weak and investment growth likely moderated.

Malaysia’s exports grew only 0.2 per cent in March, compared with 6.7 per cent annual growth the previous month.

Malaysia’s ringgit has seen some recovery after a difficult 2015, when it was hit by the collapse in global crude prices, slowing demand from top-trade partner China and a financial scandal tied to state-owned 1Malaysia Development Berhad (1MDB).

During the first quarter of this year, the market had concerns about who would succeed highly-respected Bank Negara Malaysia (BNM) Governor Tan Sri Zeti Akhtar Aziz when her term ended on April 30.

But those worries ended when the government on April 27 appointed Zeti’s deputy, central bank veteran Datuk Muhammad Ibrahim.

Concerns over 1MDB continue to weigh on the currency. The fund defaulted in April on a US$1.75 billion (RM7.052 billion) note.

A ringgit surge 

In the second quarter, the ringgit has been the worst performing Asian currency, shedding about 3.1 per cent against the dollar. But it remains the best performer this year, after strengthening 10 per cent in January-March.

The currency’s early 2016 surge was driven by the return of foreign investors, who poured into Malaysian stocks and bonds on better crude oil prices, a resilient economy and easier monetary policies from major central banks.

But this rebound in investment inflows is expected to be tempered by continued anxiety among Malaysian consumers over the cost of living. Consumption has been crimped by a 6 per cent goods and services tax imposed in April 2015.

The economy “is supported by net exports but overall we will see a slowdown in growth, pulled down by domestic demand,” said Hong Leong Investment Bank economist Ket Ee Sia.

In January, the government trimmed its full-year growth forecast to 4.0-4.5 per cent from 4.0-5.0 per cent. In 2015, the economy expanded 5 per cent. — Reuters