NEWS

M’sia growth seen slowing slightly, recovery in sight

Reuters

Published
Modified 13 May 2015, 10:57 am

Malaysia’s economy likely grew at a slightly slower pace in the first quarter due to weaker exports, but a surge in factory output and private consumption in March prior to the implementation of a new consumption tax may offer support.

First quarter gross domestic product (GDP) was estimated to have risen 5.5 percent from a year earlier, according to the median forecast of a Reuters poll, slower than 5.8 percent in the fourth quarter. The forecasts ranged from 5.0 to 6 percent.

Full-year growth is expected to come in at 5.0 percent according to the latest poll, compared with 6.0 percent in 2014.

“We see a very good chance that this Friday’s first quarter of 2015 GDP data will surprise on the upside, given the good historical relationship between Malaysia’s industrial production and GDP,” Michael Wan, an economist with Credit Suisse in Singapore, wrote in a note to clients on Monday.

Malaysia’s March industrial production rose 6.9 percent from a year ago, better than market expectations, supported by the mining and manufacturing sectors.

Hong Leong Investment Bank yesterday raised its first quarter GDP growth estimate for Malaysia to 5.5 percent from 4.8 percent previously, citing better-than-expected factory output growth.

Although exports dropped in the first two months of 2015, mainly hurt by weaker demand from China and lower shipments of commodities, it surged in March, raising expectations that Malaysia may be on a recovery path.

Malaysia’s trade surplus in the first quarter stood at RM21.33 billion.

Nevertheless, slumping oil prices could still have impacted revenue of the net energy-exporter in the first quarter. The implementation of the Goods and Services Tax (GST) from April also threatens to weaken domestic demand.

While GST could help Malaysia’s economy weather a period of lower oil revenue due to weaker energy prices, it has also raised the central bank’s concerns over inflationary pressure.

The central bank left its overnight policy rate unchanged last week, wary of fanning already high household debt while it deals with the inflationary impact from the consumption tax.

This may prompt Malaysian Prime Minister Najib Abdul Razak to focus attention on lowering living costs in the government’s new five-year economic development plan to be announced next week.

Malaysia’s consumer price index in March edged higher to 0.9 percent from a year earlier due to increases in alcohol and tobacco prices.

- Reuters

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