By NG MIN SHEN /Pic by TMR FILE
The Malaysian economy expanded 4.7% in the fourth-quarter of 2018 (4Q18), boosted by private sector activity and rebound in exports of goods and services.
Bank Negara Malaysia (BNM) said that the services sector was helped by higher consumer spending, while the manufacturing sector was driven by the electronics and electrical (E&E) and consumer-related clusters.
Commodities-related sectors continued to recover from production disruptions experienced since 2Q18, with stronger expansion in the mining and agricultural sectors.
For the whole 2018, the economy of South-east fourth largest economy grew 4.7% – a number deemed “highly respectable” by BNM governor Datuk Nor Shamsiah Mohd Yunus (picture).
“It was always our baseline case that 2018 will be a year when the economy will moderate from the exceptional performance in 2018. We were impacted by unanticipated factors like disruption in the supply sector and a brief period of uncertainty following the 14th General Election (GE14),” Nor Shamsiah told a media briefing in Kuala Lumpur today.
The country’s GDP for 2018 was slightly below the central bank’s prior forecast of 4.8%.
Going forward, notable headwinds that could affect national economic growth include global trade tensions and slowing in the global economy and global financial markets, that could have a possible spillover impact on Malaysia.
Nor Shamsiah said the negative spillovers from global trade tensions have already been factored in the central bank’s growth forecast.
She added that despite the downside risks, Malaysia’s future growth will be sustained by the commencement of the Refinery and Petrochemical Integrated Development (RAPID) project in Johor, the establishment of new E&E facilities, sustained domestic demand, civil engineering projects including the Mass Rapid Transit alone 2 (MRT2) and the Pan Borneo Highway, and recovery on the supply side.
“While there are downside risks, the baseline for 2019 is for the national economy to remain on a steady growth path,” Nor Shamsiah said.
Private sector demand is expected to remain the main driver of growth amid continuing fiscal rationalisation while the external sector is likely to soften due to moderating external demand.
Headline inflation declined to 0.3% in 4Q18 from 0.5% in 3Q18, mainly due to transport inflation turning negative as well as the tax holiday period.
Going forward, headline inflation is anticipated to average higher, with the impact of the consumption tax policy on headline inflation in 2019 to start lapsing towards end-2019.
Underlying inflation is likely to be broadly stable in 2019 in the absence of strong demand pressure.
The current account surplus widened to RM10.8 billion in 4Q18 from RM3.8 billion in 3Q18, supported by a larger goods surplus and a smaller income deficit, which more than offset the higher services deficit.
Foreign direct investment (FDI) flows improved to RM12.9 billion in 4Q18 from RM4.3 billion in 3Q18 (revised from RM3.9 billion previously), mainly channelled into the manufacturing and non-financial services sectors.
Advanced economies including the Netherlands, Japan and Hong Kong were the largest contributors of FDI during the quarter.
The ringgit depreciated by 1.8% against the US dollar last year in line with most regional currencies, but has appreciated by 1.5% for the year-to-date as at Feb 12, 2019.
“Going forward, external uncertainties will continue to affect the ringgit. These include US monetary policy normalisation, softening global growth and developments surrounding global trade and protectionism,” Nor Shamsiah said.