Malaysia’s pace of economic growth is expected to have declined for a fifth straight quarter in April-June, thanks to still-weak global commodities demand and tepid private investment.

The median forecast in a Reuters poll of 14 economists was for annual growth of 4.0 percent in the second quarter, down from 4.2 percent in the first three months this year.

If the growth figure to be reported by the central bank tomorrow is below 4.2 percent, April-June will be the worst period since the third quarter of 2009, when the economy contracted 1.2 percent.

Chief among the reasons a further slowdown is anticipated is weak net exports, hurt by anaemic global demand, according to ratings firm Moody’s Investors Service.

“As a result, private investment will be weak as firms delay improving their production capacity until demand warrants it,” Moody's said in a note published Aug 5.

In January-March, private investment expanded 2.2 percent from a year earlier, less than half the pace in the preceding quarter.

Malaysia’s June exports grew 3.4 percent from a year earlier in ringgit terms, contrary to poll expectation of a 4.2 percent contraction. However, they continued to be weighed down by poor commodities shipments, especially for liquefied natural gas and crude oil.

Ringgit rebounds

Malaysia’s ringgit has strengthened about 7 percent this year after a bad 2015 when it plummeted more than 20 percent against the dollar on the collapse of global crude prices, slowing demand from top-trade partner China and a financial scandal tied to state-owned 1Malaysia Development
Berhad (1MDB).

Prime Minister Najib Abdul Razak continues to face graft allegations related to 1MDB, a focus of lawsuits filed by US prosecutors seeking to seize US$1 billion in American assets they contend were bought using money stolen from the fund.

Private consumption continues to be the main driver of Malaysia’s economy, though better-than-expected trade and industrial production may give an extra boost, according to Wan Suhaimie Wan Saidie, economist at Kenanga Investment Bank.

South-East Asia’s third-largest economy saw June industrial production grow 5.3 percent from a year earlier, higher than forecast and double the increase seen in May.

However, a dip in agriculture output due to El Nino will put a drag on an expected marginal improvement in domestic consumption, said Hong Leong Investment Bank economist Ket Ee Sia.

In January, the government trimmed its full-year economic growth forecast to 4.0-4.5 percent from 4.0-5.0 percent. In 2015, the economy expanded 5 percent.

- Reuters