KUALA LUMPUR, Feb 12 — Malaysia’s economy beat expectations and picked up speed in the last quarter of 2013, with strong exports expected to shield the Southeast Asian country from volatile emerging markets and an expected moderation in domestic demand this year.
Exports rebounded towards the end of the year as a gradual recovery in the global economy spurred more shipments of electronics and commodities, sharply widening the current account surplus in the fourth quarter.
The central bank said today domestic demand also drove Malaysia’s economic expansion although it expected consumer spending to slow with the government cutting subsidies of petrol and other essential items.
“While domestic demand is expected to moderate following the ongoing fiscal consolidation, the external sector is expected to benefit from improving global conditions,” the central bank said in a statement.
“The growth momentum is therefore expected to remain on a steady trajectory,” it added.
Fourth quarter gross domestic product grew 5.1 per cent from a year earlier, central bank data showed, above a 4.8 per cent median projected in a Reuters poll of 13 economists and the fastest since the last quarter of 2012.
Full-year growth was at 4.7 per cent compared with 4.6 per cent in the poll, and compared with 5.6 per cent in 2012. Most economists expect growth to pick up to between 5.0 and 5.5 per cent this year.
Economists see 2014 growth coming from government spending on major infrastructure works such as a US$15 billion (RM50 billion) city rail project and strong exports, which notched a 14.4 per cent jump in December from a year ago. Exports to China rose by more than 37 per cent.
“Exports and investments will continue to contribute to Malaysia’s GDP growth in 2014, whereas domestic consumption will no longer be an issue,” said Santitarn Sathirathai, economist with Credit Suisse in Singapore.
Rate hike?
Malaysia joins Indonesia and the Philippines in posting stronger-than-expected growth in the final quarter of the year that will help bolster these countries from the turmoil affecting emerging markets.
Resilient growth in Malaysia may build the case for a hike in interest rates that has been unchanged since mid-2011, just as inflation ticks up and the ringgit is the worst performer among major Asian currencies this year.
The ringgit had been weighed down by a narrowing current account surplus in the first half of 2013, a chronic budget deficit and high debt burden. The currency is down 1.3 per cent against the dollar so far this year.
“We think inflation and financial stability concerns will prompt a rate hike in the first half of this year, whereas the consensus expects the first hike to come only in the third quarter,” Capital Economics analyst Krystal Tan said in a note. — Reuters
