4.7% GDP growth indicates rising momentum


The country’s improving growth in its economic performance for the fourth quarter of 2018 (4Q18) indicates the onset of a rising pace, after a decline that was experienced from the beginning of 2018.

Sunway University Business School’s Professor of Economics Dr Yeah Kim Leng (picture) said the 4.7% GDP growth as announced by the Bank Negara Malaysia yesterday signals the resilience of Malaysia’s private economy despite the remaining repercussion of the country’s political transition last year.

“The growth performance was slightly above the market expectations despite being weaker than some of the neighbouring countries’ growth.

“Given the country’s political transition, the performance is considered to be respectable and indicative of the private sector’s resilient economy, particularly the strength of domestic demand in the form of private consumption and investment,” he told The Malaysian Reserve.

The 4.7% growth in the last financial quarter was mainly fuelled by the rebound in exports of goods and services as well as the improvement in private sector activities.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the recovery in export activities has supported the country’s overall economic growth.

“The economic growth was higher in the final quarter last year, primarily driven by the consumer spending which has been growing at above-trend level.

“Similarly, the turnaround in exports to 1.3% — after contracting 0.8% in the preceding quarter — has also helped the overall growth in the 4Q18,” he said.

However, he added that the investment sector has been subdued, which was within the research house’s expectations based on the country’s index performance across the sectors.

“The investment was lethargic and is pretty much in line with the recent Purchasing Managers’ Index (PMI) indices that remained below the 50-point demarcation line for four consecutive months,” he said.

Socio-Economic Research Centre Sdn Bhd ED Lee Heng Guie said the robust private consumption, which was the backbone of the country’s economy last year, signalled the resilient consumer spending amid the expiring of the tax holiday.

“The consumer spending was driving the growth in the 4Q18 even though it grew slightly slower than the previous quarter.

“It showed that the household spending was fairly resilient despite the expiring of the tax holiday and the introduction of the Sales and Services Tax,” he said.

However, he added that the government needs to address the fluctuating performance of private investment.

“The growth showed the bottomed- out economy in the 3Q has been recovering and performed within the market expectations.

“But, there are still some concerns whether this performance will continue coming into 2019,  particularly for the strength of private investment, which has slowed down in the 4Q and has been fairly uneven and weak over the last few quarters,” he said.

For 2019, Yeah said the country is expected to grow nearly at 5% amid the threatening and unresolved trade tension between the US and China.

“We look forward to an improved and better performance in 2019 although sentiments have thickened in the face of rising uncertainties, particularly the US-China trade war and the no-deal Brexit.

“All of these will weigh on the domestic business confidence and the consumer sentiment,” he said.

Yeah added that the country’s moderate growth outlook will remain feasible as long as the global economy is maintained at the current pace.

“We do not expect a sharp increase in growth to lift the economy next year, similar to the rising exports in 2017 which lifted Malaysia to reach one of the highest performance.

“However, we do expect investor confidence to improve on the back of the various measures taken by the government to ensure transparency, integrity and accountability of the soundness of public finance,” he said.

Mohd Afzanizam said the trade tension, as well as the tightening of global financial conditions, could impact the labour hiring decision and capital expenditure (capex).

“The growth, moving forward, is tilted on the downside of the trade tension and tightening of global financial conditions while the global PMI index has been consistently on a declining trend, suggesting manufacturers are very cautious in their outlook.

“This would give an impact to the labour hiring decision and capex. It is important for the government to speed up its development expenditure in order to resuscitate the growth and inject confidence in the economy,” he said.

He added that the research house is maintaining its 2019’s GDP forecast of 4.5% in view of the uncertainty in the external front as well as normalisation in consumer spending coupled with cautious investment activities by the private and public sector.