MALAYSIA’S GROWTH SLOWS IN Q1
Economy decelerates for two consecutive quarters
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.
Chinese tourists take photos in Bentong, Malaysia. Tourism plays a vital role in the country’s economy.