GDP growth seen moderating to 5.2% in Q2

PETALING JAYA: Standard Chartered Global Research expects Malaysia’s gross domestic product (GDP) growth to have eased to 5.2% in the second quarter (Q2) from 5.4% in Q1.

The Statistics Department is expected to release the Q2 GDP data later this week.

“We expect GDP growth to have eased to a still-firm 5.2% year-on-year (y-o-y) from 5.4% in Q1,” Standard Chartered Global Research said in a report.

“The zero-rating of the goods and services tax from June 1, with the sales and service tax only coming into effect from Sept 1, resulted in a tax holiday; this may have boosted private spending in June.”

Meanwhile, Standard Chartered Global Research said palm oil production may have weighed on headline GDP growth, as production fell 6.4% y-o-y likely due to lower crude palm oil prices after five consecutive quarters of a y-o-y increase.

In addition, a review of mega-infrastructure projects post-election may have weighed on investment, and therefore, GDP growth.

“While we maintain our 5.3% growth forecast for the year, growth may be more reliant on private consumption than before, supported by the tax holiday in Q2 and Q3 and a healthy labour market,” Standard Chartered Global Research said.

Nevertheless, household consumption is already running hot at 7% y-o-y and may be weighed down by slowing property prices and still-high household leverage.

“Meanwhile, we have cut our investment (due to the review of mega-projects) and external outlook (due to trade tensions).

“On balance, we estimate a small positive output gap currently, but the risk scenario is biased towards the downside and monetary policy loosening if trade tariffs expand beyond the current US$50bil of goods,” it said.