Malaysia: Economy accelerates in Q3, supported by private consumption
November 11, 2016
In the third quarter of 2016, GDP expanded 4.3% over the same period last year. The figure marked an acceleration compared to the 4.0% increase in Q2 and beat market expectations of a 4.0% rise. According to the Department of Statistics Malaysia, strong private consumption growth offset weak fixed investment and government consumption. Q3’s figure confirms private consumption’s emergence as the growth pillar of the economy after the collapse of oil prices limited the government’s ability to spend. A quarter-on-quarter comparison showed that seasonally-adjusted GDP growth picked up from 0.7% in Q2 to 1.5% in Q3.
Domestic demand pushed Q3’s expansion by increasing 4.2% (Q2: +4.9% year-on-year). Private consumption growth remained unchanged at Q2’s 6.4% in Q3—the fastest rate since Q2 2015—supported by sustained wage and employment growth, as well as the increase in the minimum wage announced on 1 July. Growth in consumption largely reflected higher spending on food and beverages, transportation and housing. Conversely, government consumption decelerated markedly in Q3, easing from a 6.5% expansion in Q2 to a 3.1% increase, owing largely to tighter fiscal policy. Fixed investment also lost steam in Q3, growing a mild 2.0% (Q2: +6.1% year-on-year).
In the external sector, exports of goods and services contracted 1.3% in Q3, which contrasted the 1.0% expansion in Q2. Imports also deteriorated, shrinking 2.3% in Q3, which was down from the 2.0% expansion in Q2. Due to the faster decline in imports, the external sector’s net contribution to overall growth swung from minus 0.6% in Q2 to plus 0.5% in Q3.
Author: Luis Lopez Vivas, Economist