KUALA LUMPUR • Malaysia's economy expanded by a stronger-than-expected 5.9 per cent in the last quarter of last year, a likely boost for Prime Minister Najib Razak ahead of national elections that must be held by August.
The brisk pace of growth over the past four quarters may increase the chances that Datuk Seri Najib, criticised over a corruption scandal at a state-owned fund and rising living costs, can fend off an election challenge from his former mentor Mahathir Mohamad.
The annual growth pace for October-December pushed last year's full-year expansion to 5.9 per cent, the best in three years and an acceleration from 2016's 4.2 per cent.
Bank Negara Malaysia (BNM) said domestic demand continued to drive growth in October-December, with healthy expansion in private consumption supported by wage and employment gains.
"Growth is expected to remain favourable in 2018, with domestic demand continuing to be the key driver of growth," the central bank added.
"The expected faster expansion in global growth would continue to benefit Malaysia's exports, with positive spillovers to the domestic economic activity."
The median forecast of a Reuters poll was for fourth-quarter growth of 5.7 per cent, from July-September's 6.2 per cent pace, the fastest in more than three years.
ANZ said it expects growth this year to remain solid at 5.8 per cent.
Mr Alex Holmes, an analyst at Capital Economics, predicted growth "will lose a little more steam over the course of this year", adding that export expansion is unlikely to be as strong as last year's.
Yesterday, the ringgit currency firmed by 0.4 per cent to 3.922 to the US dollar at midday. It has strengthened nearly 13 per cent since Jan 4, when it hit a 19-year low of 4.988.
The central bank said the ringgit had "outperformed" most regional currencies during last year's fourth quarter, but it remains cautious of external risks.
BNM said its monetary policy "remains accommodative", and that its decision to raise its key rate by 25 basis points to 3.25 per cent last month "reflects a normalisation, and not a tightening of monetary conditions".