International News

Malaysia economy grows 4.5% in Q4, beating forecasts

By Thursday February 18th, 2016 No Comments
Malaysia's economy expanded 4.5 per cent in the fourth quarter of 2015 from a year earlier.PHOTO: BLOOMBERG

Malaysia’s economy expanded 4.5 per cent in the fourth quarter of 2015 from a year earlier.PHOTO: BLOOMBERG

KUALA LUMPUR (REUTERS) – Malaysia’s economy lost more momentum in the fourth quarter but grew faster than market expectations, with domestic demand helping to offset slumping oil and commodity prices.

The economy expanded 4.5 per cent in the fourth quarter compared with a median forecast of 4.3 per cent in a Reuters poll, and down from 4.7 per cent in the third quarter.

Southeast Asia’s third-largest economy grew 5 per cent in 2015, slowing from 6 per cent in 2014, but growth was within the government’s 4.5-5.5 per cent estimate.

The central bank, however, warned that the economy was expected to face a “challenging operating environment in the immediate future”.

“Growth will continue to be driven by domestic demand, with some support from net exports,” Bank Negara Malaysia (BNM) said in a statement on Thursday (Feb 18).

On the bright side, the current account surplus doubled to 11.4 billion ringgit (S$3.85 billion) in the October-December period from the previous quarter, boosted by higher portfolio and foreign direct investments.

Fourth quarter growth was partly propped up by improving private consumption, which rose 4.9 per cent compared with 4.1 per cent in the previous quarter.

That was helped by a dip in inflation to 2.6 per cent in the fourth quarter – down from 3 per cent in the previous three months – due to lower domestic fuel prices, though positive sentiments were offset by higher cost of food and cigarettes.

The central bank cautioned the economy continues to face elevated downside risks as evident in heightened financial market volatility in early 2016 amid concerns of slowing global growth, the fall in energy prices and global policy shifts.

“Going forward, although the global economy is projected to expand further, growth is expected to be moderate and uneven,” BNM said.

Capital Economics said in a research note that despite its above-consensus forecast for the fourth quarter, it was far from upbeat about prospects for Malaysia this year.

“The effects of low commodity prices will continue to feed through into the real economy, curtailing investment in the energy sector, keeping commodity export income weak and hurting fiscal revenue.”

The ringgit was Asia’s worst performer in 2015, battered by the global crude oil slowdown and uncertainty tied to a corruption scandal involving state fund 1Malaysia Development Berhad (1MDB).

The country’s rapidly diminishing surplus could also pose a risk for the ringgit, although the currency has recently found some respite with a return of foreign capital to ringgit bonds.

The ringgit firmed after the GDP data, hitting a session high of 4.1540 against the US dollar.

Source: Straits Times

Leave a Reply