Malaysia's economy up 4.5% in Q4 but full-year growth lowest since 2009

Domestic demand expanded at a more moderate pace in the fourth quarter, Bank Negara Malaysia says, with an improvement in private consumption. The ringgit - which has taken a beating in the past two years - began to stabilise towards the end of the f
Domestic demand expanded at a more moderate pace in the fourth quarter, Bank Negara Malaysia says, with an improvement in private consumption. The ringgit - which has taken a beating in the past two years - began to stabilise towards the end of the fourth quarter amid higher stability in global financial markets.PHOTO: AGENCE FRANCE-PRESSE

KUALA LUMPUR • Malaysia's economy grew 4.5 per cent in the fourth quarter from a year earlier, ending a year of tepid growth on a stronger note, helped by solid exports and resilient domestic demand.

The growth was driven by private sector spending and manufacturing and services sectors, the central bank said yesterday. Growth topped the third quarter's 4.3 per cent.

But full-year growth slowed to 4.2 per cent, compared with 5 per cent the year before - the lowest annual figure since 2009.

Malaysia "continued to gain momentum" in the final quarter, Capital Economics said, "but against a backdrop of lacklustre external demand, high household debt and limited scope for additional policy support, we doubt growth will pick up further". Bank Negara Malaysia (BNM) said domestic demand will remain the key driver of growth.

From October to December, domestic demand "expanded at a more moderate pace as the improvement in private consumption and investment activity was more than offset by the decline in public expenditure", the central bank said.

BNM said that Malaysia's current account surplus widened to RM12.2 billion (S$3.89 billion) in the fourth quarter, from RM6 billion in the third quarter.

Prime Minister Najib Razak is looking to reverse a weak economy hit over the last two years by slumping global oil and gas prices.

Mr Najib, whose popularity has been hurt by the scandal involving state-owned fund 1MDB, is preparing for a tough election that needs to be held by August next year.

The ringgit, which has taken a beating in the past two years, began to stabilise towards the end of the fourth quarter amid higher stability in global financial markets, BNM said. Last year, the ringgit weakened by 2.7 per cent against the US dollar, but this year, it strengthened by 0.8 per cent.

"The depreciation was driven mainly by portfolio investment outflows from emerging economies amid uncertainties arising from the outcome of the US presidential election," the bank said.

DBS, in a note ahead of the gross domestic product data, said that domestic growth is likely to remain resilient and external demand will improve, so "there will be less room for further monetary easing" by BNM. Its overnight policy rate is expected to remain at 3 per cent for the rest of the year.

REUTERS

A version of this article appeared in the print edition of The Straits Times on February 17, 2017, with the headline 'Malaysia's economy up 4.5% in Q4 but full-year growth lowest since 2009'. Print Edition | Subscribe