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Malaysia's economy surges 6.4% in second quarter

Malaysia's economy grew a better-than-expected 6.4 per cent in the second quarter on the back of stronger exports and robust domestic demand, the central bank said Friday (Aug 15).

KUALA LUMPUR: Malaysia's economy grew a better-than-expected 6.4 per cent in the second quarter on the back of stronger exports and robust domestic demand, the central bank said Friday (Aug 15).

Southeast Asia's third largest economy said exports jumped 14.2 per cent in the three months through June compared to the same quarter last year, which saw slack external demand for Malaysian goods. Private investment, especially in the services and manufacturing sectors, surged 12.1 per cent, while private consumption grew 6.5 per cent in the quarter year-on-year, the bank said.

"Exports and private sector activity remained the key drivers of growth during the quarter," Bank Negara said in a press release. "Going forward, the Malaysian economy is expected to remain on a steady growth path," it said, adding export growth was expected to "moderate slightly" in the year's second half.

Affin Investment Bank economist Alan Tan said second half growth was expected to come in at around 5.2 per cent year-on-year. "The broad-based recovery in exports and domestic demand will likely continue in the second half however," he told AFP. Tan said economic growth for the year was expected to slightly exceed the government forecast of between 5 to 5.5 per cent.

Inflation averaged 3.3 per cent in the second quarter, the central bank said, down from 3.4 per cent in the first quarter. Last month, Bank Negara raised the overnight policy rate, a key interest rate, by 25 basis points to 3.25 per cent to curb inflation in the first adjustment in more than three years. Tan said the central bank was not expected to raise the rate any further this year.

The government is planning to introduce a goods and services tax next year, which economists have welcomed to help lower one of Asia's highest debt-to-GDP ratios. But thousands protested that plan in an opposition-led rally on May Day, expressing fears the expected six per cent tax would further burden ordinary consumers already struggling with rising prices.