Improved external demand and stronger performance from the services sector expected

By ALIFAH ZAINUDDIN

Malaysia’s second-quarter (2Q) gross domestic product (GDP) is expected to hover above 5%, amid the improved external demand and stronger performance from the services sector.

AllianceDBS Research chief economist Manokaran Mottain said the services sector index grew at its fastest pace in two years, rising by 7% year-on-year (YoY) in 2Q of 2017 (2Q17), fuelled by higher private consumption during the quarter.

Retail sales jumped by 11.5% in 2Q17, while the Malaysian Institute of Economic Research Consumer Sentiment Index rallied to a record high of 80.6 points — the highest since 4Q14, albeit still below the 100- point parity level.

Meanwhile, improved external demand contributed to a 9.8% rise in manufacturing activity, as production grew by a faster than anticipated rate of 6.2% in 2Q17, led by the electrical and electronics (E&E) subsector.

“The strong trend seen in manufacturing production reflected the exports data seen during the quarter,” Manokaran said in a statement. Exports surged 20.6% for the quarter under review, lower than the 27.7% posted in the preceding quarter, while imports expanded 19.1%.

“The rising imports trend suggests that future exports will still be stronger in the coming months. We continue to maintain inflation forecast of 3.5% for 2017 and expect the Overnight Policy Rate to be kept steady at 3% throughout the year,” he added.

Standard Chartered regional research head for South-East Asia Edward Lee projects the country’s 2Q17 GDP to grow 5.4%, driven by a strong display in private consumption and investment.

Sunway University Business School economics professor Dr Yeah Kim Leng also expects the quarterly growth figure to fall between 5% and 5.5%.

Bank Negara Malaysia is slated to announce Malaysia’s 2Q17 GDP numbers this Friday. A Reuters poll suggests that the country’s economic growth is expected to ease slightly in 2Q17 on weaker private consumption, despite a boom in manufacturing and trade.

The survey, based on a median forecast of 12 economists, anticipates growth for the April to June period to stand at 5.4% against the same period last year, lesser than the 5.6% stride in 1Q17. Following an exceptional

1Q17 performance, backed by solid exports and strong domestic demand, Malaysia’s full-year GDP has been revised to 4.9% by the World Bank and 4.8% by the International Monetary Fund from 4.4% and 4.5% respectively.

In June, World Bank Group senior country economist for Malaysia Dr Rafael Munoz Moreno said the “worst of the global economic slowdown is behind us”, adding that this was the first time in many quarters that an upgrade was made to the revision rather a downgrade.

The central bank, on the other hand, expects full-year growth to range between 4.3% and 4.8%, higher than the 4.2% GDP in 2016.