Malaysia: Economy slows on the back of weaker external sector
May 23, 2012
Malaysia's export-driven economy moderated at the outset of the year, dragged down by lower external demand, while domestic demand remained resilient. In the first quarter of 2012, GDP grew 4.7% over the same period last year, which undershot the 5.2% expansion recorded in the fourth quarter but came in above market expectations that had GDP increasing 4.6%. Domestic demand remained strong (Q4 2011: +7.5 year-on-year; Q1 2012: +9.0 yoy) as private consumption continued to gain some momentum (Q4: +7.3% yoy; Q1: +7.4% yoy) and gross fixed capital formation soared (Q4: +8.4% yoy; Q1: +16.1% yoy). On the other hand, public spending moderated sharply due to government efforts to contain the rampant fiscal deficit, slowing from 22.9% in the fourth quarter to 5.9% in the first. On the external front, exports of goods and services slowed markedly from a 5.5% increase in the fourth quarter 2011 to a 2.8% rise in the first, while imports of goods and services grew at a slower pace (Q4: +7.8% yoy; Q1: +6.8% yoy). As a result, the external sector's net contribution to overall growth fell from minus 1.3 percentage points in the fourth quarter to minus 3.0 percentage points in the first.