Malaysia beats forecasts to post 4.9% Q2 growth

Stronger consumer spending was one of the factors that helped Malaysia become the first South-east Asian nation to report an acceleration in growth from the previous quarter. Its pickup in growth contrasts with other economies in its neighbourhood, w
Stronger consumer spending was one of the factors that helped Malaysia become the first South-east Asian nation to report an acceleration in growth from the previous quarter. Its pickup in growth contrasts with other economies in its neighbourhood, which have slowed this year as the US-China trade war hits demand for exports.ST FILE PHOTO

Strong consumer spending, palm oil output boost GDP

KUALA LUMPUR • Malaysia's economy grew faster than expected in the April-June period and it became the first South-east Asian nation to report an acceleration in growth from the previous quarter, driven by stronger consumer spending and palm oil production.

The region's third-biggest economy also loosened currency hedging rules in a push to boost market liquidity and prevent its bonds from being excluded from global index provider FTSE Russell's benchmarks, which has loomed as a major concern for investors.

Central bank data yesterday showed second-quarter gross domestic product (GDP) grew 4.9 per cent year on year, beating the 4.8 per cent forecast in a Reuters poll, and faster than the 4.5 per cent pace in the first quarter.

Malaysia's pickup in growth contrasts with other economies in its neighbourhood, which have slowed this year as the US-China trade war hits demand for exports.

But analysts and policymakers warn that increased global risks pose challenges for Malaysia's outlook.

"Clear downside risks remain on the immediate horizon, stemming primarily from external factors," Bank Negara Malaysia (BNM) governor Nor Shamsiah Mohd Yunus said.

Malaysia's full-year growth is still expected to come in within the central bank's 4.3 to 4.8 per cent target range, but Datuk Nor Shamsiah said an escalation in global trade tensions could knock 0.1 percentage point off GDP growth.

Indonesia, the Philippines and Singapore have all reported weaker growth in the second quarter than in the first. Thailand will report April-June data next Monday.

"We are forecasting a further slowdown in global growth over the coming quarters, which would weigh on demand for Malaysia's exports," Capital Economics Asia economist Alex Holmes said in a note after the data. "The recent escalation in the US-China trade war will be another headwind."

Malaysia is one of the most vulnerable countries to the US-China trade war, being a large exporter of intermediary goods to China.

The ringgit fell 1.5 per cent against the US dollar in the second quarter amid a weakening global growth outlook and escalating trade tensions.

The current account surplus narrowed to RM14.3 billion (S$4.8 billion) in the second quarter, from RM16.4 billion in the first quarter, separate central bank data showed yesterday.

Headline inflation is expected to average higher in the second half of the year as the impact of tax policy changes lapse, BNM said.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 17, 2019, with the headline 'Malaysia beats forecasts to post 4.9% Q2 growth'. Print Edition | Subscribe