Malaysia: Growth softens as favourable base effect continues to fade
February 18, 2011
The economic recovery continues, albeit at a slower pace. In the fourth quarter, GDP increased 4.8% over the same period the previous year. The print came in slightly below the 5.3% expansion tallied in the third quarter but was in line with last month's Consensus Forecast of a 4.7% increase. The deceleration reflects, in part, the waning of a favourable base effect, which had boosted growth in the previous quarters (Q3 2009: -1.2% year-on-year; Q4 2009: +4.4% yoy). That said, the deceleration was mostly driven by slower growth in the domestic sector. Gross fixed investment moderated from an expansion of 9.8% in the third quarter to rise 9.2%, while private consumption growth slowed to 6.5% (Q3: +7.1% yoy). Nevertheless, total consumption picked up, as government spending moderated the pace of decline over the third quarter (Q3: -10.2% yoy: Q4: -0.3% yoy). Meanwhile, the net contribution from the external sector to overall growth stepped up from minus 3.5 percentage points in the third quarter to minus 1.6 percentage points in the fourth quarter. The improvement came as imports moderated sharply, expanding 3.3% (Q3: +11.0% yoy), whereas the deceleration in exports was less marked, slowing from a 6.6% expansion in the third quarter to a 1.5% increase in the fourth. At the sector level, the slowdown was the result of a weaker performance in agriculture and industry. Agriculture recorded a 4.3% contraction (Q3: +2.7% yoy), while industry growth slowed to 4.7% (Q3: +5.4% yoy). In contrast, services accelerated from a 5.4% rise in the third quarter to a 6.2% increase, buttressed by robust growth in wholesale and retail trade as well as in real estate and business services. In the full year 2010, the economy expanded 7.2%.