KUALA LUMPUR • Malaysia posted its slowest economic growth and smallest current account surplus in over two years, with third-quarter data offering little relief for a country whose currency has lost 20 per cent of its value this year.
The Malaysian ringgit is Asia's worst performing currency, having been hit hard by weak global prices for the country's gas and commodity exports, subdued demand from China as well as a scandal at an indebted state fund that has raised questions over Prime Minister Najib Razak's leadership and weakened investor sentiment.
Bank Negara Malaysia governor Zeti Akhtar Aziz yesterday told a news conference the central bank was still pressing 1Malaysia Development Berhad (1MDB) for answers on some transactions, while refusing to be drawn into the political fray. "Although the economy is facing a considerable number of shocks, it has remained resilient as reflected by the steady growth performance of our economy," she said after the release of the data.
"The current situation warrants, however, a high degree of alert but not alarm."
The economy grew at 4.7 per cent in the third quarter, the slowest rate since the second quarter of 2013, though in line with forecasts from a Reuters poll of economists.
It continued a downtrend this year, as GDP expanded by 5.6 per cent in the first quarter and 4.9 per cent in the second quarter. The current account surplus narrowed to RM5.1 billion (S$1.6 billion) in the third quarter from RM7.6 billion in the previous three months, to also post its lowest level since the second quarter of 2013.
Some analysts see the rapidly diminishing surplus posing a risk for the ringgit. "The current level of current account surplus is a very low buffer to potential capital outflows. The ringgit still remains vulnerable," said analyst Michael Wan at Credit Suisse in Singapore.
Still, Ms Zeti said the ringgit, which showed little reaction to the data trading around 4.3700, is significantly undervalued at current levels. "It does not reflect the country's fundamentals as the current account remains in surplus, unemployment remains low and inflation is within Malaysia's long- term average," she said.
On the upside, exports jumped in September, rising more than twice the forecast on the back of a weaker ringgit and demand for electrical and electronic products from the United States and Europe.
Malaysia's exports and imports were up 3.2 per cent in the quarter, the data showed. Inflation was running at 3 per cent in the third quarter, and is expected to peak in the first quarter of next year before moderating, the central bank said.
Malaysia, like many other emerging market economies, has lost favour among investors as expectations of a rise in US interest rates mounted over the year.
But the 1MDB scandal also played a part in net portfolio investment outflows of RM24.4 billion during the third quarter, which took the total outflow for the first nine months to RM44 billion.
Ms Zeti said the bank will continue to request information from 1MDB and, if not given it, the fund's subsequent requests for approval can be rejected.
"We will not be drawn into any political developments or any political agenda," she said, adding that the bank is focused on ensuring macroeconomic stability and financial stability.