Malaysia GDP Growth Beats Forecasts as Economy Expands 5.8%

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Malaysia’s economy grew faster than economists forecast in the second quarter, fueled by stronger consumer spending and a pick-up in manufacturing.

Key Points

  • Gross domestic product rose 5.8 percent from a year earlier, after climbing 5.6 percent in the first quarter, Bank Negara Malaysia said Friday
  • The median estimate of 26 economists surveyed by Bloomberg was 5.4 percent
  • GDP rose a seasonally adjusted 1.3 percent from the previous three months

Big Picture

Malaysia’s economy is gaining momentum as it grows at the fastest pace in more than two years. The global trade recovery has spurred exports, with Malaysia outperforming its peers in the region as earlier weakness in the currency helped to keep its manufacturing industry competitive. The World Bank raised the nation’s growth forecast in June by the most in East Asia, projecting 4.9 percent expansion this year.

Central bank Governor Muhammad Ibrahim told reporters in Kuala Lumpur that growth will probably exceed the official forecast of 4.8 percent this year. The bank last month held its benchmark interest rate at 3 percent as inflation pressures eased and growth prospects strengthened.

Speaking in general terms, Muhammad said “when economic growth is entrenched, and if inflation is essentially benign, it gives Bank Negara a bit more flexibility in terms of policy.”

“But as far as we are concerned, we will look at the data objectively,” he said. “Our next meeting will be in September, early September, so we will look at it and see where we should move forward.”

Economist Takeaways

  • “Malaysia’s better-than-expected economic performance was largely driven by private consumption which printed much stronger than we had expected,” said Weiwen Ng, an economist at Australia & New Zealand Banking Group in Singapore. “Although Malaysian exports have undoubtedly benefited from strong global demand and a weaker currency, the improvement has been narrowly concentrated in the electronics segment and geographically to China. These characteristics do question the longevity of the export cycle.”

Market Reaction

  • The ringgit strengthened after the data, paring its decline against the dollar on Friday. The currency was trading at 4.2960 as of 1:07 p.m. in Kuala Lumpur, taking its gain this year to 4.4 percent
  • The key stock index fell 0.2 percent

Other Details

  • Consumer spending surged 7.1 percent in the second quarter from a year earlier
  • Government expenditure growth slowed to 0.2 percent from 6.8 percent
  • Investment held up in the quarter, expanding 7.4 percent from a year earlier
  • Exports climbed 9.6 percent, while imports rose 10.7 percent
  • Services, the biggest sector in the economy, increased 6.3 percent
  • Manufacturing growth accelerated to 6 percent from 5.6 percent
  • Current-account surplus widened to 9.6 billion ringgit from 5.3 billion ringgit in the first quarter

— With assistance by Michael J Munoz

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