BUCKING THE TREND
Malaysia’s GDP growth quickened in Q2 as domestic demand and a commodity rebound helped it weather a regional slowdown.
Malaysia’s economic growth quickened in the second quarter as strong domestic demand and a rebound in commodity prices helped it weather a regional slowdown.
GDP expanded 4.9% in the second quarter from a year ago, up from 4.5% in the previous three months, according to figures from the central bank. That was the strongest expansion since early 2018 and beat economists’ median estimate of 4.7%.
Bank Negara Malaysia Governor Nor Shamsiah Mohd Yunus said the central bank expects full-year GDP growth of 4.3%-4.8%, affirming the previous estimate.
Malaysia’s strong showing bucks the trend across the region, where the US-China trade war has taken a toll on trade-reliant economies. Earlier this week neighbouring Singapore cut its full-year growth forecast to almost zero, and Thailand is expected to roll out a stimulus package later Friday. Goldman Sachs Group Inc analysts on Thursday downgraded their forecasts for Asia’s four “Tiger” economies amid growing trade tensions.
In addition to commodities strength, Malaysia’s manufacturing has also proven resilient, said Brian Tan, a regional economist at Barclays Bank in Singapore. The question is how long Malaysia can skirt the headwinds.
“Our base scenario is that this is likely the peak for growth this year and we’ll see a slowdown in the second half,” Mr Tan said. “Headwinds from the trade war will grow ever harder, and on an aggregate level it won’t benefit anyone, not even Malaysia.”
Alex Holmes, an economist at Capital Economics, wrote in a research note that the economy would still struggle to pass the low end of the central bank’s target range, predicting it would come in at 4.2%. While consumer spending has surged since the government scrapped a goods and services tax last June, that boost will fade from the statistical base going forward.
“We doubt this is the start of a sustained rebound,” Mr Holmes said. “We are forecasting a renewed slowdown in the second half of this year, driven by weaker consumer spending and a challenging external environment.”