KUALA LUMPUR, Feb 16 — Malaysia’s economy grew at the fastest pace in a year last quarter, as stronger consumer spending and an export recovery helped counter falling government expenditure.
Key points
Gross domestic product rose 4.5 per cent last quarter from a year earlier, Bank Negara Malaysia said in an e-mailed statement today The median estimate of 18 economists surveyed by Bloomberg was 4.4 per cent GDP expanded a seasonally adjusted 1.4 per cent from the previous three months The economy grew 4.2 per cent in 2016 from 5 per cent in 2015
Big picture
Malaysia’s economy has come under pressure in recent years as lower commodity prices and a slump in global demand hurt exports and crimped revenue. Domestic consumption has been a key growth driver and the central bank has kept interest rates low to help support spending.
A rebound in oil prices gives the government more room to spend, allowing it to roll out infrastructure projects including new rail lines in the capital and a highway connecting the Borneo states of Sabah and Sarawak. The central bank took steps to curb offshore trading of the ringgit last year as it plunged about 10 per cent against the US dollar in the past six months. Rising inflation may limit the scope for further policy easing to support growth.
Economist takeaways
“We expect Malaysia’s growth to stabilise at around 4.5 per cent over the next couple of years,” Krystal Tan, an economist at Capital Economics Ltd in Singapore, said in a note. “Against a backdrop of lacklustre external demand, the non-commodity export sector is unlikely to provide a significant lift to the economy either, despite the boost to the competitiveness of Malaysian non-commodity exports from a fall in the currency.” ”High levels of household debt will constrain private consumption growth,” she said. “What’s more, there is little scope for additional fiscal or monetary policy support to push growth higher.” “It is an encouraging set of numbers and affirms expectations that growth will remain in a relatively safe zone of above 4 per cent,” said Julia Goh, an economist with United Overseas Bank Ltd in Kuala Lumpur. “The only question I have is the resiliency of the services sector which, if it moderates further, could be a drag to overall growth. There’s also the risk of protectionist policies that could derail the recovery in global trade.”
Other details
Private consumption expenditure, which makes up about half of gross domestic product, climbed 6.2 per cent last quarter from a year ago Public sector spending fell 4.2 per cent Exports rose 1.3 per cent, after contracting in the previous three months Growth in the services industry, the biggest in the economy, slowed to 5.5 per cent in the fourth quarter from 6.1 per cent in the previous three months Manufacturing rose 4.8 per cent from 4.2 per cent. — Bloomberg
