Malaysia’s economy grew 4.5 percent in the fourth quarter from a year earlier, ending a year of tepid growth on a stronger note helped by solid exports and resilient domestic demand.

Fourth-quarter growth was driven by private sector spending and manufacturing and services sectors, the central bank said today.

Growth matched the median forecast of 4.5 percent in a Reuters poll, and topped the third quarter’s 4.3 percent.

But full-year 2016 growth slowed to 4.2 percent, compared to 5.0 percent in 2015 and the lowest annual figure since the economy contracted in 2009.

Malaysia “continued to gain momentum” in the final quarter, Capital Economics said, “but against a backdrop of lacklustre external demand, high household debt and limited scope for
additional policy support, we doubt growth will pick up further.”

Bank Negara said domestic demand will remain the key driver of growth.

Improved consumption

In October-December, domestic demand “expanded at a more moderate pace, as the improvement in private consumption and investment activity was more than offset by the decline in public expenditure,” the central bank said.

Bank Negara said that Malaysia’s current account surplus widened to RM12.2 billion (US$2.74 billion) in the fourth quarter, from RM6 billion in the third quarter.

Prime Minister Najib Abdul Razak is looking to reverse Malaysia’s weak economy, hit over the last two years by slumping global oil and gas prices. The leader, whose popularity has been hurt by a scandal involving state-owned fund 1MDB, is preparing for a tough election that needs to be held by August 2018.

The central bank said the currency ringgit, which has taken a beating over the past two years, began to stabilise towards the end of the fourth quarter amid higher stability in the global financial markets.

“The depreciation was driven mainly by portfolio investment outflows from emerging economies amid uncertainties arising from the outcome of the US presidential elections,” the bank said.

In 2016, the ringgit weakened 2.7 percent against the dollar. This year, it has strengthened 0.8 percent.

DBS, in a note ahead of today’s GDP data, said domestic growth is likely to remain resilient and external demand improve, so “there will be less room for further monetary easing” by BNM and its overnight policy rate is expected to remain 3.0 percent for the rest of 2017.

- Reuters