Malaysia posts surprise 4.3% growth in Q3

Workers at a wholesale market in Kuala Lumpur. The central bank said Malaysia's economy was underpinned by continued expansion in private-sector spending and additional support from net exports in the third quarter.
Workers at a wholesale market in Kuala Lumpur. The central bank said Malaysia's economy was underpinned by continued expansion in private-sector spending and additional support from net exports in the third quarter. PHOTO: AGENCE FRANCE-PRESSE

But turnaround eclipsed by slump in ringgit to a 12-year low in offshore markets

KUALA LUMPUR • Malaysia's economy grew 4.3 per cent in the third quarter, accelerating after five straight quarters of decline, but the surprise turnaround was overshadowed by a slump in the ringgit to a more than 12-year low in offshore markets.

The economy was underpinned by continued expansion in private-sector spending and additional support from net exports in the third quarter, the central bank said yesterday.

Growth was better than the 4 per cent posted in the second quarter, but below the 4.7 per cent recorded in the same quarter last year.

Consumers and companies are now the growth pillars of the economy after a collapse in global crude prices hurt exports and curtailed the government's ability to spend.

Private consumption expenditure climbed 6.4 per cent last quarter from a year ago, compared with 6.3 per cent in the previous three months. Overall public-sector spending rose 0.3 per cent in the period, easing from 6.9 per cent previously. Exports fell 1.3 per cent in the third quarter from a year earlier.

"Although growth in Malaysia is currently relatively subdued, it is projected to pick up as policy measures gain traction and global prospects improve," said central bank governor Muhammad Ibrahim.

EXPECTED TO PICK UP

Although growth in Malaysia is currently relatively subdued, it is projected to pick up as policy measures gain traction and global prospects improve.

CENTRAL BANK GOVERNOR MUHAMMAD IBRAHIM

Prime Minister Najib Razak has allocated more funds for the poor and promised civil servants a bonus to support domestic consumption.

Net exports grew 5.9 per cent in the third quarter, up sharply from a 7 per cent drop in the second quarter.

The current account surplus widened to RM6 billion (S$1.9 billion) in the third quarter, from RM1.9 billion over the April-June quarter.

Inflation moderated to 1.3 per cent.

"The better-than-expected economic performance reduces the need for monetary easing," said ANZ Research economist Weiwen Ng.

But the central bank warned that the ringgit will continue to see volatility and face risks from fallout from the United States presidential election result and Brexit.

The currency struck its weakest level in more than 12 years in offshore markets yesterday as investors dumped government bonds, while the spot rate barely moved as the central bank kept a tight grip on the onshore market.

"Ringgit will continue to be market-determined. The central bank's role is to manage extreme volatility with no targeted level or pre-determined path," the governor said.

The central bank delivered a surprise 25 basis-point cut in the benchmark overnight policy rate in July.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on November 12, 2016, with the headline 'Malaysia posts surprise 4.3% growth in Q3'. Print Edition | Subscribe