Malaysia's economy up 5.4% in second quarter

Malaysia's economic growth, as measured by gross domestic product (GDP), for the second quarter ending on June 30 rose by an unexpected 5.4 per cent year-on-year, underpinned by an expansion in manufacturing and robust domestic demand.

GDP growth for the first quarter was revised to 4.9 per cent from 4.7 per cent, while growth for the first half of the year stood at 5.1 per cent compared with the same period a year ago. Compared with the first quarter, GDP expanded by 3 per cent.

In the supply side of the economy, only the agricultural sector saw a contraction due to lower crude palm oil production. Manufacturing, services, construction and mining all posted growth. Domestic demand jumped 13.8 per cent for the quarter and rose 11.8 per cent for the first-half.

The country's second-quarter GDP numbers came as a surprise to many economists, whose median forecast was for a 4.6 per cent expansion. Growth for the quarter even exceeded the most optimistic forecast of 5.2 per cent.

Bank Negara governor Dr Zeti Akhtar Aziz said at a briefing following the release of the GDP data that the surge in private investment was the most encouraging aspect of the economy.

“Private investment has made a strong return because the investment climate has improved tremendously, with Malaysia moving up the rankings of various surveys in terms of competitiveness, costs and ease of doing business,” she said.

Zeti said the improvement was underscored by the higher implementation of investments by domestic and foreign investors. She added that civil engineering projects in the oil and gas, transport, utilities and services industries had helped spur growth in the construction sector.

By numbers, investments from the public and private sectors jumped 26.1 per cent year-on-year for the quarter under review, with the first half rising 21.3 per cent.

By sector, private investments rose 24.6 per cent while public investments surged 28.9 per cent. For the first half, private sector investments grew 22.4 per cent while public sector investments expanded 19.5 per cent.

Consumption rose 8.9 per cent for the quarter and 11.8 per cent in the first half. By sector, private consumption increased 8.8 per cent for the quarter and 8.1 per cent for the first half while public consumption expanded 9.4 per centfor the quarter and 8.4 per cent in the first half.

Zeti said monetary policy continued to be supportive of growth and that for the rest of the year, risks weighed on growth rather than on inflation with external headwinds still overshadowing the outlook.

She said it would take time for the global economy to recover and this would need action from various stakeholders.

“At this point, we're maintaining our forecast of 4 per cent to 5 per cent GDP growth for the year but this may change when the budget is announced (on Sept 28). This will come in at the upper range of the forecast if growth is robust,” Zeti added.

Alliance Investment Bank Bhd chief economist Manokaran Mottain has revised GDP growth for the year to 4.7 per cent from 4.5 per cent previously, with the second half to record growth of 4.5 per cent.

He told StarBiz the third quarter would see expansion at its slowest.

Manokaran said despite the surprising growth figures, the global and domestic economy's outlook for the rest of the year would still be dampened by the eurozone debt crisis, slower expansion in China and tepid growth in the United States.

“We believe the eurozone crisis will continue to have an impact on trade and this will show itself in slower exports growth,” he said.

He added that with a drop in manufacturing activity, sentiments would be affected, leading to slower growth in the domestic-oriented services sector as consumption slowed.

Manokaran said Purchasing Managers Index (PMI) for July indicated that exports would slow as demand dropped in developed markets.

CIMB Investment Bank Bhd economic research head Lee Heng Guie said in a report that the leading index for June suggested that the economy could weaken in the second half.

“We caution that a sharply high base in the second half of last year poses a hurdle to year-on-year growth,” he said.

He pointed out that the global Organisation for Economic Co-operation and Development composite leading together with regional high-frequency indicators, including trade and PMI, were still under external pressures.

Meanwhile, the Statistics Department released data showing that July prices as measured by the Consumer Price Index gained 1.4 per cent year-on-year to 104.8 and remained unchanged compared with the previous month.-Asia News Network (August 16, 2012)