KUALA LUMPUR (NewsRise) – Malaysia’s economic growth accelerated in the third quarter, ahead of market expectations, largely powered by private sector spending and net exports, official data Friday showed.
Gross domestic product of the third-largest Southeast Asian economy grew 4.3% between July and September when compared to the same quarter last year, the central bank said. That compares to a median 4.0% growth predicted by economists and the second quarter’s 4.0% year-on-year gain. On a seasonally-adjusted basis, Malaysia’s economy grew 1.5% from the second quarter.
“The Malaysian economy is expected to expand by 4.0%-4.5% in 2016,” Bank Negara Malaysia said in a statement. “Overall, while domestic conditions remain resilient, uncertainties in the external environment may pose downside risks to Malaysia’s growth prospects.”
Bank Negara Malaysia’s Governor Muhammad Ibrahim said domestic demand will remain key growth driver due to continued increase in wages and employment. “So, as long as that two components persist, domestic consumption will remain and support our economy going forward,” he said at a news conference.
Economists said Malaysia’s better-than-expected economic growth reduces the need for monetary easing, although a sharp pick up is unlikely as the trade-reliant nation grapples with sluggish demand for its merchandise exports.
Malaysia’s central bank kept the overnight policy rate steady at 3.00% at its last meeting in October after cutting the benchmark rate by a quarter percentage point in July. Bank Negara Malaysia officials will meet on November 23 for this year’s final monetary policy review.
“While we had expected private consumption to remain resilient, the actual [data] was stronger than what we had envisaged,” said Australia & New Zealand Banking Group’s economist Weiwen Ng. “The widening current account surplus will also help mitigate capital outflow pressures.”
Malaysia’s current-account surplus widened to 6.00 billion ringgit ($1.36 billion) in the third quarter from 1.90 billion ringgit in the previous quarter due to higher surplus on goods account and a lower deficit on secondary income account.
The economic growth data showed, domestic demand rose 4.7% year-on-year in the third quarter, thanks to gains in private sector consumption. Meanwhile, net exports of goods and services expanded 5.9% compared to a 7.0% contraction in the previous quarter.
The services sector, which accounts for 54% of Malaysia’s gross domestic product, grew 6.1% in the third quarter, manufacturing output gained 4.2% and mining sector climbed 3.6% year-on-year. However, the agriculture sector contracted 5.9% in the quarter.
The industrial production index–which measures output from factories, mines, and power plants-rose 3.2% year-on-year in September and lifted the gauge 4.1% in the third quarter from a year earlier, according to a separate set of data released by the Department of Statistics.
Capital Economics’ analyst Krystal Tan expects “growth to remain stuck at around 4.0%-4.5% over the next couple of years.” However, the government has projected the economy to grow up to 5% next year.
(Source: Nikkei Asian Review)