Hornbill Unleashed

August 12, 2016

Malaysia’s growth slips to 4.0pct in Q2

Filed under: Politics — Hornbill Unleashed @ 9:01 PM

Malaysia’s growth pace slid for the fifth straight quarter in April-June, and avoiding a further decline could depend on domestic demand staying resilient at a time that global demand for the country’s commodities remains weak.

The trade-dependent South-East Asian economy had annual growth of 4.0 percent in the second quarter, the central bank said today.

That matched a Reuters poll forecast, marked a slip from January-March’s 4.2 percent and was the slowest pace in nearly seven years.

Malaysia’s problems include the slowdown in top trade partner China and poor prices for its energy and other commodity exports. Prime Minister Najib Abdul Razak faces graft allegations related to 1Malaysia Development Berhad. He has denied any wrongdoing.

Bank Negara Malaysia governor Muhammad Ibrahim indicated confidence that the economic growth rate won’t slide further.

“To date our economy remains resilient driven by domestic demand and is on track to grow within the projected 4.0-4.5 percent (for 2016) amid a challenging global environment,” he
told a press conference.

Some economists are not so sanguine.

ANZ said “any faltering in domestic demand could be the dynamic that triggers significant growth deterioration” and also possibly another 25 basis point rate cut by the central bank.

In July, BNM cut its benchmark rate for the first time in three years, to 3.0 percent.

UOB economist Julia Goh agreed that one more rate cut this year is possible.

“It looks like a slow second half,” she said. “If there’s anything that will help prop up the economy, it’s going to be domestic demand and probably more stimulus measures, that we expect will be announced in the 2017 Budget.”

Domestic demand lift

Second quarter growth was propped up by annual 6.3 percent expansion in domestic demand, up from 5.3 percent in January-March. Private investment grew 5.6 percent from a year earlier, against 2.2 percent the previous quarter.

In the first half of 2016, exports grew only 0.2 percent from a year earlier, in ringgit terms.

The current account surplus narrowed to RM1.9 billion (US$472 million)in the second quarter, from RM5 billion in the first quarter, due to a smaller trade surplus and higher net income payments, the central bank said.

Brian Tan, South-East Asia economist at Nomura, said the current account balance shrank mainly due to narrowing in the goods trade surplus from a drop in prices of exported liquefied natural gas.

“We think the prices have bottomed out and that should keep the current account balance in surplus for the rest of the year,” said Tan.

Weiwen Ng, economist at ANZ, said the current account balance and ringgit “will continue to be held hostage by oil prices”.

The ringgit currency has strengthened about 7 percent this year, but depreciated by 2.5 percent in the second quarter and is again weaker than 4.00 to the dollar.

Muhammad said today that volatility is the new normal for currencies in the region, and he expects the ringgit to perform in the long-run on strong economic fundamentals.

Joseph Sipalan & Liz Lee, Reuters


1 Comment »

  1. Q3 … 2 %

    Q4 … 0 % … declare bankrupt?

    Comment by tiger yk — August 15, 2016 @ 7:54 AM | Reply

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