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Financial News: Malaysia's Q2 Growth Tops Expectations On Strong Consumpti

Malaysia's Q2 Growth Tops Expectations On Strong Consumption

08/16/2019 - 04:44:00 (RTTNews)

(RTTNews) - Malaysia's economy grew more-than-expected in the second quarter as strong household spending offset the drag from the global slowdown, data from the Department of Statistics showed Friday.

Gross domestic product grew a better-than-expected 4.9 percent from last year, faster than the 4.5 percent expansion seen in the first quarter, the Bank Negara Malaysia said in its quarterly bulletin. The rate was forecast to improve to 4.7 percent.

On a quarterly basis, GDP expanded 1 percent versus a 1.1 percent increase in the preceding period.

Data showed that domestic demand advanced 4.6 percent annually, underpinned by household spending and higher private investment.

Private consumption climbed 7.8 percent on festive spending and income growth. Public consumption gained only 0.3 percent.

Meanwhile, gross fixed capital formation contracted 0.6 percent on continued decline in public investment.

Gross exports showed a positive growth of 0.2 percent, while imports declined 1.2 percent.

BNM Governor Nur Shamsiah Mohd Yunus said growth is expected to come within the central bank's full-year target range of 4.3 percent -4.8 percent.

Alex Holmes, an economist at Capital Economics, said the strength in the private spending is unlikely to last. Further, export growth is set to remain weak and government plans to tighten its policy. Consequently, a renewed economic slowdown is expected in the second half of the year. Persistently low inflation allows scope for more Bank Negara Malaysia policy easing, Prakash Sakpal, an ING economist, said.

"We have stuck in an additional 50 basis points of BNM rate cut in our forecast for policy rates for the rest of the year, taking them to 2.5 percent by year-end," the bank added.

The central bank had reduced its key rate by a quarter-point to 3 percent in May, citing downside risks.

The production-side of GDP showed that the service sector growth slowed to 6.1 percent from 6.4 percent. Driven by the domestic-oriented industries, manufacturing output expanded 4.3 percent after rising 4.2 percent in the first quarter.

Mining rebounded 2.9 percent, which was the first positive change since the third quarter of 2017. Growth in construction improved to 0.5 percent, while farm output growth slowed to 4.2 percent.

Reflecting higher investment income, the current account surplus of the balance of payment remained sizeable at MYR 14.3 billion or 3.9 percent of GNI in the second quarter.

In the second quarter, headline inflation increased to an average 0.6 percent, mainly reflecting the lapse in the impact of the GST zerorisation, and core inflation was unchanged at 1.6 percent.

The central bank expects headline inflation to average higher in the second half of 2019 compared to the first half following the lapse in the impact of consumption tax policy changes. Underlying inflation is forecast to remain stable.

The central bank expects headline inflation to average higher in the second half of 2019 compared to the first half. Underlying inflation is forecast to remain stable.

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