EXCEEDING EXPECTATIONS
Bank Negara to revise forecast after economy expanded 5.8pc in second quarter
MALAYSIA’S economy expanded 5.8 per cent in the second quarter, beating expectations. Bank Negara says based on the 5.6 per cent growth in the first quarter and 5.8 per cent in the second, the full year’s growth projection of between 4.3 and 4.8 per cent is expected to ‘go beyond our earlier forecast’. Economists expect the momentum to continue through the year.
The truth is, as the most recent report from the World Bank concluded, and I quote: ‘The Malaysian economy is progressing from a position of strength. PRIME MINISTER DATUK SERI NAJIB RAZAK, SPEAKING AT THE 63RD MASTER BUILDERS ASSOCIATION OF MALAYSIA ANNIVERSARY DINNER
THE economy performed stronger than expected in the first half of the year, prompting Bank Negara to revise its full-year growth forecast.
The economy expanded 5.8 per cent in the second quarter, taking the market by surprise, and from the strength of activities, the official growth projection of 4.3 to 4.8 per cent would need to be revised upwards.
This brings the half-year growth to 5.7 per cent, the fastest pace since the first half of 2014. The economy grew 5.6 per cent in the first quarter.
Bank Negara Governor Datuk Seri Muhammad Ibrahim said the new growth projection for the year would be announced at the tabling of the 2018 Budget in October.
“Based on the 5.6 per cent in the first quarter and 5.8 per cent in the second quarter, we expect the full-year numbers to go beyond our earlier forecast,” Muhammad said yesterday.
Economists expect the momentum to continue through the year, powered by strong domestic and external demands.
Domestic demand is projected to underpin this expansion while Malaysian exports are expected to benefit from the strongerthan-expected improvement in global growth.
Growth has improved across major countries in the world and led to a strong recovery in global trade, providing an additional boost to gross domestic product (GDP) growth in Asian economies.
Muhammad said private sector spending continued to be the main driver of growth with expenditure exceeding that of the public sector.
World Bank representative to Malaysia, Faris Hadad-Zervos, said the latest data was very encouraging and in line with the bank’s 4.9 per cent projection.
“All of this is very good and it offers the Malaysian government a reason to continue consolidating, to use this window, which will be a very long window spanning the next couple of years, to continue consolidating its reform agenda and bring down its fiscal deficit to zero (and to continue its investments into public expenditure).”
Credit Suisse said the strong growth confirmed the robustness of the economy this year.
“While the strength of GDP will fade somewhat in the second half of the year, we doubt that this will be a sharp slowdown,” said economist Michael Wan.
The negative impact of subsidy cuts, such as on cooking oil, should continue to fade over the rest of the year.
Public infrastructure projects, such as train lines and highways, would continue to support investment activity.
“Most importantly, the labour market continues to heal, with employment growth starting to pick up and unemployment slowing over the past six months, indicating that the recovery is not just concentrated in the public sector,” he said.
Barnabas Gan of OCBC Bank said the strong growth marked the fourth consecutive quarter in which economic growth had accelerated.
“The strong prints were underpinned in part due to the relatively weaker ringgit, which gave Malaysia a competitive edge over its Asian peers, as well as overall stronger-than-expected improvement in global economic performance,” Gan added.