by NG MIN SHEN/ pic by ISMAIL CHE RUS
MALAYSIA’S economy as measured by GDP grew 4.5% in the first-quarter of 2019 (1Q19), beating economist estimates of circa 4.3% to 4.4% on continued expansion in domestic demand and recovery in agricultural production, although weakness in overall investment activity weighed on growth.
Private sector activity remained the key driver of growth on the back of firm private consumption expansion, while the agriculture sector rebounded to 5.6% in 1Q19 from -0.1% in 4Q18 on account of strong recovery in oil palm yields, Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus (pic) said at a press briefing in Kuala Lumpur today.
With effect from the first-quarter of the year, Malaysia’s GDP in constant terms will be rebased to 2015 prices from 2010 prices previously, reflecting the enhancement of data sources and coverage as well as methodological improvements, in line with international standards for statistical compilations.
Private investment growth plunged to 0.4% in 1Q19 from 4.4% recorded in 4Q18, weighed down by weak machinery and equipment investment amid softening demand and moderating business sentiment.
“While there are risks to private investment coming from the slowdown in global growth, overhang in the property market and some lingering policy uncertainties, there will be support from ongoing multi-year projects and greater certainty on some of the mega projects moving forward. Also, foreign direct investment (FDI) approvals for last year was at a record high, so we will see translation of some of these FDI into real investments sometime this year,” Nor Shamsiah said.
With ongoing uncertainties surrounding geopolitical and trade factors continuing to affect the ringgit, the central bank said it will undertake several development initiatives to enhance the liquidity and accessibility of Malaysia’s financial markets.
These include enhancements to repo market liquidity and flexibility due to the repo market’s role in secondary market trading activities, physical delivery for Malaysian Government Securities (MGS) futures, expansion of the dynamic hedging programme to include trust banks and global custodians, increased flexibility for dynamic hedging programme participants to manage foreign exchange (forex) risks, a simplified forex transaction and documentation process, and extending ringgit liquidity beyond local trading hours.
According to Nor Shamsiah, the initiatives will partly address the concerns raised by FTSE Russell, which is currently reviewing whether or not to drop Malaysia from the FTSE World Government Bond Index due to market accessibility issues.
However, she noted that these initiatives are a result of BNM’s continuous engagements with investors and index providers, rather than a direct response to FTSE Russell’s review.
“This series is a culmination of the productive talks we’ve had with investors, including index providers. It just so happened that the finalisation of these measures happened to coincide with the announcement of the 1Q19 GDP and we thought this would be an opportune time to announce this.
“These measures will improve market accessibility, which is one of the criteria mentioned by FTSE Russell. We will continue our discussions with them,” Nor Shamsiah said.
She added that the US’ latest move to hike import tariffs on goods from China, as well as China’s retort by raising tariffs on US goods starting June 1, have already been factored into the central bank’s forecast of 4.3% to 4.8% GDP growth for Malaysia in 2019.