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Malaysia's economy speeds up in Q4 on improved exports

Malaysia's economy speeds up in Q4 on improved exports

People cross a road outside a strip of shopping malls in downtown Kuala Lumpur on Feb 13, 2019. (Photo: AFP/Mohd Rasfan)

KUALA LUMPUR: Malaysia's economy expanded at a faster pace in the final quarter of 2018, ending a year of weakening momentum as resilient exports helped to shore up growth amid a slowdown in global demand from the US-China trade war.

Solid GDP growth provides a welcome reprieve for Prime Minister Mahathir Mohamad's administration, which has faced simmering discontent over rising living costs less than a year after romping to a shock general election victory in May.

The central bank said it expects the economy to remain on a steady growth path moving forward, supported by steady domestic demand and improving external appetite for Malaysia's exports.

"Malaysia will continue to experience quality growth in external demand and that will provide support to growth in 2019," Bank Negara Malaysia (BNM) Governor Nur Shamsiah Mohd Yunus told a news conference.

Southeast Asia's third-largest economy expanded 4.7 per cent in the fourth quarter from a year earlier, up from 4.4 per cent in the third quarter. The outcome was in line with the median estimate of a Reuters poll but was better than some economists had expected.

Gains from improved exports, however, are likely not enough to propel a sustained rebound of Malaysia's economy, with investment and private consumption growth slowing in the October-December period compared to the past quarter, Capital Economics said.

"Consumption growth is likely to slow further as the boost from last year's scrapping of the Goods and Services Tax fades," the London-based economic research firm said in a client note.

"There will be other drags on growth this year, too. Fiscal policy is set to weigh on domestic demand as the government aims to reduce the deficit."

Private consumption remained a key driver of the economy but grew at a slightly slower pace of 8.5 per cent in the fourth quarter, compared with 9 per cent in July-September.

Full-year 2018 growth came in at 4.7 per cent, just below the government's forecast of 4.8 per cent but far short of the 5.9 per cent pace a year earlier. Earlier, the government said it expected 2019 full-year expansion to come in at 4.9 per cent.

Markets barely reacted to the GDP data and remained subdued in afternoon trade.


Electronics and electrical products boosted exports, helped by shipments ahead of higher anticipated US-China trade tariffs, while output from the mining sector also improved, the central bank said.

Malaysia's trade surplus rose an annual 6.9 per cent in the fourth quarter to 34.6 billion ringgit, In the third quarter, the surplus fell 4.1 per cent from a year earlier.

The current account surplus grew to 10.8 billion ringgit (US$2.7 billion) for the October-December period.

Nur Shamsiah said the ringgit depreciated 1.8 per cent on the dollar in 2018, in line with most regional currencies, but has since rebounded 1.5 per cent since the start of the year.

The central bank expects inflation to be higher on average this year after benign cost pressures in 2018. Full-year 2018 inflation was 1 per cent.

In November, the government rolled out an expanded budget to help boost the economy, but also laid out plans to cut public spending sharply as it looks to slash debt of more than 1 trillion ringgit that Mahathir blamed on the past administration of Najib Razak. 

Source: Reuters/ec


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