Malaysia: Pace of growth moderates in the first quarter
May 17, 2018
Growth in the Malaysian economy moderated for a second consecutive quarter in the first quarter of this year. Economic activity expanded 5.4% year-on-year in the January–March period; the result came in below market expectations of a softer slowdown to 5.5% and below the prior quarter’s 5.9% increase. However, in quarter-on-quarter seasonally-adjusted terms, economic growth sped up to 1.4%, up from the prior quarter’s 1.0%.
A breakdown of the drivers of the annual growth rate showed that the performance was spearheaded by resilient private consumption, while fixed investment growth was nearly flat. Household expenditure grew 6.9%, slightly below the 7.0% logged in the fourth quarter of last year. It was supported by still-low unemployment and could be boosted in the coming quarter by the new government’s decision to remove the Goods and Services Tax, effective 1 June. Fixed investment, meanwhile, grew at a very weak pace of 0.1% (Q4: +4.3% year-on-year). The result reflected a contraction in public fixed investment; private fixed investment grew at a slow pace, likely weighed down by pre-election jitters. In a similar vein, government consumption also grew at a meager pace of 0.4%—significantly below the prior quarter’s 6.8%.
On the external front, exports increased 3.7%, coming in below the 6.7% expansion in the fourth quarter as external demand growth weakened. Imports recorded a 2.0% contraction, contrasting the robust increase seen in the prior quarter (Q4: +7.3%).
All told, while the economy still grew at a solid pace, the result marked the second consecutive slowdown. The moderation came amid a shake-up in the country’s political make-up, with the Barisan Nasional party being ousted from power for the first time since the country gained independence following the 9 May election. This leaves the new government in charge of boosting the economy, but many questions about the policy direction of the new administration are still unanswered. Nonetheless, the economy’s fundamentals remain robust, and the economy is expected to continue growing at a resilient pace this year.
Malaysia GDP Forecast
FocusEconomics Consensus Forecast panelists expect GDP to grow 5.3% in 2018, which is from last month’s projection. For 2019, the panel expects economic growth of 5.0%.
Author: Jan Lammersen, Economist