Econ­omy de­cel­er­ates for two con­sec­u­tive quar­ters

The Gulf Today - Business - - FRONT PAGE -

KUALA LUMPUR: Malaysia’s an­nual eco­nomic growth slowed to 5.4 per cent in the first quar­ter of 2018, leav­ing the coun­try’s new gov­ern­ment with the task of turn­ing around an econ­omy that has de­cel­er­ated for two con­sec­u­tive quar­ters.

Re­leas­ing the lat­est gross do­mes­tic prod­uct data on Thurs­day, the cen­tral bank said do­mes­tic de­mand would help growth stay favourable, though the Jan­uary­march per­for­mance was be­low a me­dian fore­cast of 5.5 per cent given by a Reuters sur­vey of econ­o­mists. An­a­lysts say tourism plays vi­tal role in the coun­try’s econ­omy.

Growth has de­cel­er­ated from 5.9 per cent in the fourth quar­ter of 2017 from 6.2 per cent in the third quar­ter, its strong­est show­ing in three years.

The slow­down comes amid un­cer­tainty over eco­nomic poli­cies of the new ad­min­is­tra­tion led by Ma­hathir Mo­hamad, who led an op­po­si­tion al­liance to a sur­prise win over his scan­dal tainted for­mer pro­tege Najib Razak and a Barisan Na­sional coali­tion that had led the coun­try for six decades.

Bank Ne­gara Malaysia said first quar­ter growth was propped up by ex­pand­ing pri­vate sec­tor ac­tiv­ity and strong sup­port from ex­ports.

“Growth is ex­pected to re­main favourable in 2018, with do­mes­tic de­mand con­tin­u­ing to be the key driver of growth,” the cen­tral bank said in a state­ment. “Growth prospects are fur­ther sup­ported by con­tin­ued pos­i­tive spillovers from the ex­ter­nal sec­tor to do­mes­tic eco­nomic ac­tiv­ity.”

Malaysia’s 2017 full year growth of 5.9 per cent was its best in three years, and well up from the pre­vi­ous year’s 4.2 per cent.

Head­line in­fla­tion was pro­jected to av­er­age 2-3 per cent in 2018, it said, fol­low­ing 1.8 per cent in the first quar­ter.

Malaysia said it will in­tro­duce a sales and ser­vice tax (SST) to partly off­set the short­fall in rev­enue from ef­fec­tively scrap­ping a goods and ser­vice tax (GST) from June.

The gov­ern­ment, which won last week’s gen­eral elec­tion, said on Wed­nes­day it would lower GST to zero per cent from June 1. Ousted leader Najib Razak had in­tro­duced the tax in 2015 amid lower oil prices.

In a state­ment on Thurs­day, the min­istry of fi­nance said the short­fall in rev­enue will be sup­ported by spe­cific rev­enue and ex­pen­di­ture mea­sures that will be an­nounced soon, in­clud­ing the rein­tro­duc­tion of the SST.

“Fis­cal re­form is be­ing im­ple­mented. Ex­pen­di­ture reduction will be­gin with ra­tio­nal­i­sa­tion and ef­fi­ciency mea­sures and re­duc­ing leak­ages,” the state­ment said. It did not say when the sales tax will be in­tro­duced.

Brian Tan, a Sin­ga­pore-based economist with No­mura, said the tim­ing of SST im­ple­men­ta­tion was a con­cern.

As­so­ci­ated Press

Chinese tourists take pho­tos in Ben­tong, Malaysia. Tourism plays a vi­tal role in the coun­try’s econ­omy.

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