Malaysia’s 1Q GDP Growth Exceeds Forecast Of Economists
KUALA LUMPUR, May 14 – The 4.2 per cent annual Gross Domestic Product (GDP) growth recorded for the first quarter (1Q16) as announced by Bank Negara Malaysia has exceeded the forecast of economists. It came in higher than the consensus estimate of 4.0 per cent, said Bank Islam Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid.
He commented that the domestic engine, particularly consumer spending, really surprised on the upside considering the 5.3 per cent growth in private consumption after expanding 4.9 per cent in the preceding quarter. He said they understand that sentiment as reflected by the Consumer Sentiment Index is generally weak, although there was a slight uptick during the first quarter. (72.9 points in 1Q16 against 63.8 points in 4Q15).
“Perhaps, the reduction in the contribution of members to the Employees Provident Fund from March, as well as the decline in petrol prices during the 1Q16, could have instilled some positivity in terms of spending decision among consumers,” he told reporters here Friday.
The pump price for RON95 was at RM1.60 per litre in March against RM1.95 in December last year. He said, however, the rise in the unemployment rate to 3.5 per cent in March after sustaining at 3.4 per cent in the past three months, suggests that such optimism is relatively fragile at the current juncture.
“On private investment, the trend is very much in tandem with weak sentiment, when it grew by 2.2 per cent from 4.9 per cent in the preceding quarter. However, with more infrastructure projects being awarded, it should give some comfort to businesses, especially the construction sector and hence, improve prospects for better growth in private investment,” said Afzanizam.
“While, prospects for the economy continues to be challenging, we believe the government, especially Bank Negara Malaysia (BNM), have the necessary resources to stabilise it. Such a policy buffer is important for confidence building and this should be positive for markets and Malaysians in general,” he added.
Meanwhile, Standard Chartered Economist Jeff Ng said the 4.2 per cent GDP performance was not too bad, considering the challenging economic conditions and the slowdown was expected given the weak export performance. He said GDP growth would remain supported by the currency effect and some pick-up in commodity prices, but, slower loan growth means that domestic growth would remain muted.
Affin Hwang Investment Bank Vice-President and Head of Retail Research Datuk Dr Nazri Khan Adam Khan said the better-than-expected GDP performance showed that BNM’s monetary policies were on track, alongside the government’s Economic Transformation Programme (ETP) and the Goods and Services Tax. He said since global crude oil prices had recovered to US$47 a barrel, there is also a good chance for the country’s fiscal deficit to be reduced further.
“The government’s recalibrated 2016 Budget was based on oil prices of between US$30 and US$35 per barrel. For the short-term momentum, we believe that growth will be solid with private consumption continuing to be the major catalyst,” Nazri Khan added.
MIDF Amanah Investment Bank Bhd Chief Economist Dr Kamaruddin Mohd Nor said in anticipation of persistent upside external risks, domestic demand is a key factor to drive the economy this year. He said the GDP growth in the second quarter would remain stable at 4.2 per cent, amid challenging external sectors and a slowing global economy.
He said they also believe that Malaysia is on track to achieve GDP growth of between 4.0 per cent to 4.5 per cent this year. Meanwhile, he also added that their forecast for FY16 is at 4.4 per cent and the main drivers for the growth will be domestic consumption followed by private investment. On the ringgit, Kamaruddin said it is poised for appreciation, gradually strengthening to RM3.85 against the US dollar by year-end.
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