Malaysia: GDP growth slows for fifth consecutive quarter in Q2
August 16, 2016
In the second quarter of 2016, GDP expanded 4.0% over the same period last year, which was the slowest rate since the height of the global financial crisis in 2009. The figure marked a deceleration compared to the 4.2% increase tallied in Q1 and was in line with market expectations. Despite strong domestic demand, growth was weighed down by the continued decline in net exports and sluggish growth in the agriculture sector, according to the Department of Statistics Malaysia. A quarter-on-quarter comparison showed that seasonally-adjusted GDP increased 1.0% in Q2, which mirrored Q1’s reading.
Domestic demand pushed Q2’s expansion by increasing 4.9% (Q1: +5.9% year-on-year), but a sharp destocking of inventories caused the slowdown. Private consumption growth accelerated from 5.3% in Q1 to 6.4% in Q2, in part due to continued income growth and a government stimulus program for low-wage employees. The growth in consumption was mainly driven by spending on food and beverages, transportation and communication. Government consumption also accelerated in Q2, picking up from a 3.8% expansion in Q1 to a 6.5% increase, owing largely to spending on infrastructure. Fixed investment growth saw a sharp recovery, growing from 0.1% in Q1 to 6.1% in Q2, which marked the fastest increase in five quarters.
In the external sector, exports of goods and services recovered slightly and grew 1.0% in Q2, which contrasted the 0.5% contraction in Q1. Imports also improved, growing 2.0% in Q2, which was up from the 1.3% expansion tallied in Q1. Consequently, the external sector’s net contribution on overall growth improved from minus 1.2% in Q1 to minus 0.6% in Q2.
Author: Luis Lopez Vivas, Economist