KUALA LUMPUR (NewsRise) – Malaysia’s economic growth accelerated in the fourth quarter largely powered by private sector spending and services, official data Thursday showed.
Gross domestic product of the third-largest Southeast Asian economy grew 4.5% between October and December when compared to the same quarter last year, the department of statistics said.
While the latest reading came in a tad above the median market expectation of a 4.4% fourth quarter growth, analysts said likely muted economic expansion through this year and a weak currency will limit the central bank’s room to tweak the policy interest rate.
“We doubt growth will pick up further,” Capital Economics’ analyst Krystal Tan said, noting lacklustre external demand, high household debt and limited scope for additional policy support. “Looking ahead, we expect Malaysia’s growth to stabilise at around 4.5% over the next couple of years.”
At a time when external conditions remain challenging, domestic demand will remain Malaysia’s key driver of growth, Bank Negara Malaysia reiterated in a separate statement.
“Private consumption is anticipated to remain supported by wage and employment growth,” the central bank said. “Investment activity will continue to be anchored by the on-going implementation of infrastructure projects and capital spending in the manufacturing and services sectors.”
Domestic demand rose 3.3% year-on-year in the fourth quarter driven by gains in private sector consumption and investment, compared with 4.6% growth in the previous three months. Net exports of goods and services expanded 5.8% year-on-year compared to 5.9% growth a quarter earlier.
The services sector, which accounts for more than half of Malaysia’s economic output, grew 5.5% in the fourth quarter. Manufacturing activities gained 4.8% while the mining sector climbed 4.9% year-on-year. However, the agriculture sector contracted 2.4% in the quarter.
Malaysia’s central bank kept the overnight policy rate steady at 3.00% at its last meeting in January after cutting the benchmark rate by a quarter percentage point in July. Bank Negara Malaysia officials will meet on March 2 for the second out of six scheduled monetary policy reviews a year.
“The scope for further easing is diminished by higher inflation and weaker domestic currency,” said Weiwen Ng, a Singapore-based economist at Australia and New Zealand Banking Group. But there is also “limited pressure” to raise rates given recent measures to support the ringgit.
The ringgit has risen about 0.7% against the U.S. dollar year-to-date, although the gain comes after last year’s 4.5% decline and some 20% decline in 2015 as falling oil prices weighed on government finances, while foreigners fled its capital markets amid expectations of higher U.S. interest rates.
Bank Negara Malaysia announced last year a raft of measures to boost liquidity in the domestic currency market that included directing exporters to retain only 25% of export proceeds in a foreign currency and to convert the remainder into ringgit. In January, the central bank said it would take more steps, if needed, to further reinforce its existing policy to stabilise the ringgit.
(Source: Nikkei Asian Review)