Malaysia: Economy surges ahead in Q2
August 18, 2017
Malaysia’s economy is moving full speed ahead as demonstrated by the release of second quarter GDP figures on 18 August. GDP expanded a healthy 5.8% over the same quarter of the previous year (Q1:+5.6% year-on-year), beating out market expectations of a deceleration to 5.4%. The annual growth was the highest reading since the first quarter of 2015 and was fueled by resilient domestic demand and a better performance from the external sector. In quarterly terms, seasonally-adjusted GDP growth eased from 1.8% in Q1 to 1.3% in Q2.
Domestic demand was behind Q1’s acceleration, increasing 6.2% (Q1: +7.4% yoy). Fixed investment moderated sharply from 10.0% in Q1 to 4.0% in Q2, weighed down by slower growth in expenditure on machinery and equipment. However, private consumption expanded markedly, by 7.1% (Q1: +6.6% yoy) on the back of building consumer confidence and higher wages. Government consumption growth moderated to 3.3% (Q1: +7.5% yoy).
In the external sector, exports of goods and services grew 12.2% in Q2, a slackening from Q1 (+12.6% yoy) but a strong print nonetheless. Imports, however, grew at a slower pace (Q2: +10.8% yoy; Q1: +18.5% yoy), causing the external sector’s net contribution to overall growth in Q2 to rise.
The positive surprise in the second quarter has led some of our analysts to re-evaluate their forecasts for this year. Commenting on Nomura’s outlook, analysts Euben Paracuelles and Brian Tan elaborate:
“With H1 GDP growth coming in at a robust 5.7%, we raise our full-year 2017 forecast to 5.5% from 5.3% further above the [Nomura] consensus estimate of 5.0% […] We expect Q3 GDP growth to remain solid at 5.8% y-o-y, broadly stable from Q2. The statistical distortion from the earlier Eid al-Fitr holiday – which fell in June this year instead of July last year – implies a favourable base effect for data in July (and Q3), particularly manufacturing activity.”
Author: Lindsey Ice, Economist