Growth beats forecasts
GDP in Q4 up 4.7%, economy’s first acceleration in growth since a year ago
KUALA LUMPUR: Malaysia’s economic growth in the fourth quarter of 2018 (4Q18) has surpassed expectations, as the country’s gross domestic product (GDP) grew 4.7% year-on-year (y-o-y).
This marks the economy’s first acceleration in growth over the last one year, following the continued slowdown in GDP growth after 3Q17 where it registered a 6.2% growth. In 4Q17, it grew by 5.9%.
An earlier Bloomberg survey had predicted a median GDP growth of 4.5% in 4Q18, marginally higher than the 4.4% growth registered in 3Q18.
Speaking to the media during the 4Q18 GDP results briefing, Bank Negara governor Datuk Nor Shamsiah Mohd Yunus said that resilient private consumption and the improvement in the commodity-related sectors had supported the growth in 4Q18, amid temporary supply disruptions.
“On the demand side, growth continued to be anchored by the private sector. Meanwhile, on the supply side, the services and manufacturing sectors remained the key drivers of growth,” she said.
The services sector grew 6.9% in 4Q18 (3Q18: 7.2%), while the manufacturing, mining and quarrying, as well as the construction sectors expanded by 4.7% (3Q18: 5%), 0.5% (3Q18: -4.6%) and 2.6% (3Q18: 4.6%), respectively.
However, the agriculture sector continued to be a drag on the economy, contracting by 0.4% (3Q18: -1.4%).
Private consumption grew 8.5% in 4Q18 and private investment was up 4.4%.
Meanwhile, public-sector consumption in the fourth quarter rose 4%. However, public-sector investment continued to decline for the fourth consecutive quarter by 4.9%.
For full-year 2018, the Malaysian economy grew 4.7% on-year, with a GDP value of RM1.23 trillion at constant prices and RM1.43 trillion at current prices.
While the central bank has described the growth as “commendable”, given the existing macroeconomic conditions, it was notably lower than the 5.9% growth in 2017.
It was also marginally lower than the government’s earlier target of 4.8%. However, the GDP growth was in line with a Bloomberg survey of 4.7%.
“In 2018, the country saw a moderation in growth after an exceptionally strong performance in 2017.
“The economy was impacted by one-off factors, namely, supply-side shocks and post-election policy uncertainty,” stated Nor Shamsiah.
She also added that the disruption in the commodity-related sectors in 2Q18 and 3Q18 as well as the government’s spending rationalisation have caused more downward pressure on the economy.
All sectors, apart from services, have seen a slowdown or contraction in 2018 when compared on a y-o-y basis.
In 2018, the services sector recorded a 6.8% growth in real GDP, following a 6.2% growth in the previous year. The manufacturing and construction sectors grew 5% and 4.2% in the year in review, lower than 6% and 6.7%, respectively.
The mining and quarrying sector saw a contraction of 1.5% in 2018 as compared to a marginal 1% growth in 2017. Meanwhile, the agriculture sector took a sharp plunge in 2018, dropping by 0.4% from a growth of 7.2% in 2017.
For the year 2018, the current account surplus reached RM33.5bil, contributed by a higher surplus in the goods account at RM121.4bil and lower deficit in the services account at RM19.7bil.
Nor Shamsiah said Malaysia’s macroeconomic fundamentals continued to remain strong despite domestic and external headwinds.
“In 2019, the Malaysian economy is likely to remain on a steady growth path, supported by resilience of private consumption and the
continuation of civil engineering projects apart from the recovery from supply side shocks,” she said.
Commenting on Malaysia’s 2018 economic performance, AmBank Group chief economist Anthony Dass said that growth was marginally higher than the research house’s projection of 4.6%.
“Noteworthy is that in 2018, inventories shaved 1.5 percentage points off the GDP growth. Moving forward, this could mean that the inventory cycle could potentially provide some upside.
“In 2019, private consumption is expected to ease in line with easing consumer confidence. Public consumption and investment will also remain muted with the continued fiscal consolidation path.
“Oil prices, which are currently below Budget 2019’s assumption of US$70 per barrel, constitute a risk to both growth and the fiscal mathematics. Additionally, ongoing trade tensions also pose a downside risk,” Dass told StarBiz.
Meanwhile, in a separate note, AllianceDBS Research said it was confident that the current fiscal reforms by the government such as the gradual increment of the minimum wage, targeted fuel subsidy and repayment of corporate tax refunds would likely lead to favourable domestic demand conditions that would support Malaysia’s private consumption and investment growth.
“We forecast a private consumption and private investment growth of 7% and 6.1% in 2019, respectively.
“However, the moderation in the manufacturing sector’s production (mainly electrical and electronics), in tandem with the slowdown of major advanced economies such as the US, China and the eurozone and a possible decline in contributions from the mining sector, would keep GDP growth subdued.
“Moving forward, we expect 2019 exports and gross fixed capital formation to register a more muted growth of 1.9% and 2.3%, respectively,” it said.