By ALIFAH ZAINUDDIN / Pic BY TMRpic
Malaysia’s 5.8% second-quarter of 2017 (2Q17) gross domestic product (GDP) growth surpassed majority expectation of a 5.4% median growth estimate.
A Bloomberg survey of 26 economists showed only three of them projected a 5.8% to 6% growth, while the rest estimated between 4.9% and 5.7%.
The stronger than expected 2Q17 outturn grew at its fastest pace since the 2Q14, which stood at 6.5%.
The country’s exports — which benefitted from its weaker currency — continued to fuel growth in the manufacturing sector.
The sector expanded by 6% in the 2Q17, led by the higher growth in global demand for electrical and electronics (E&E) products.
In June, E&E exports increased by 15.1% year-on- year, representing 38% of total merchandise exports.
Moreover, strong global demand for electronics saw E&E exports rise 20.5% for the first-half of 2017 (1H17).
The ringgit gained slightly after Bank Negara Malaysia’s (BNM) announcement last Friday, trading at RM4.29 against the greenback (as at 3.30pm) after waning for much of August.
The solid 2Q17 performance has prompted Australia and New Zealand Banking Group Ltd (ANZ) to revise its full- year GDP forecast for Malaysia to 5.3% from 4.9%.
The bank expects growth to moderate in the 2H17 to 4.9% against the 5.7% registered in the preceding half, due to the country’s limited export growth prospects.
“In its recent monetary policy statement, BNM alluded to improving growth prospects, stating that the current upturn in exports would be sustained and generate positive spillovers to the domestic economy. We are, however, more sceptical on the growth front,” ANZ economist Weiwen Ng said in a statement.
Ng said despite better exports performance from strong global demand and a weaker currency, Malaysia’s exports have been narrowly concentrated in the E&E segment and geographically to China.
“These characteristics do question the longevity of the export cycle, which will be critical for overcoming the legacy problems of sub-optimal capacity utilisation and poor profitability,” she added.
IHS Markit Ltd Asia-Pacific chief economist Rajiv Biswas said while some pullback in growth momentum is expected in the 2H17, following the rapid growth in the 1H17, economic growth is expected to remain robust boosted by continued construction spending and growth in manufacturing output.
“The outlook for the electronics sector remains favourable in the coming months, with the IHS Markit Global Electronics Purchasing Managers’ Index for July at 55.7, still indicating strong global electronics output and new orders,” Biswas said.
IHS Markit forecast the Malaysian economy to maintain its rapid growth in 2017, with full-year GDP growth exceeding 5%.
The country’s GDP is projected to further grow at around 5% in 2018 and 2019.