Malaysia’s economy to hit 4.7% in 3Q19

Private consumption will remain as the key catalyst of economic growth for the country in 3Q19


MALAYSIA’S economy is expected to expand 4.7% from July 2019 to September 2019 despite the US-China trade war which is dragging global economies to their knees.

Global growth has been slashed as Beijing and Washington has so far failed to find a compromise to their trade war. Asean countries which bank on both the US and China as their main trading partners are feeling the drub.

An economist with a local research house said private consumption will remain as the key catalyst of economic growth for Malaysia in the third quarter of 2019 (3Q19), in tandem with rising consumer sentiment and retail sales growth.

Similar drivers will also push the 4Q19 economic growth, said the economist.

“We view good fundamental drivers, including favourable labour market conditions and fairly contained inflationary pressure, to continue supporting consumer spending,” he told The Malaysian Reserve.

The research house highlighted that Malaysia had a low jobless rate of 3.3% in August 2019 and there were signs in the private sector’s wage.

“Economic activities should also get a boost from the low interest rate environment, especially after Bank Negara Malaysia cut Overnight Policy Rate by 25 basis points to 3% in the last Monetary Policy Committee meeting,” said the economist.

However, the research house remains cautious over any growth prospects due to external risks.

In August, Malaysia’s total exports declined by 0.8% year-on-year (YoY) to RM81.4 billion, lower than consensus expectations of 2.7% YoY increase.

The decline was mainly due to the weak demand for electrical and electronic products and lower shipments to our major export markets, namely China and Singapore, the analyst said.

On agriculture segment, Malaysia’s palm oil output gained 8.6% to 5.4 million metric tonnes, suggesting agriculture segment to chart a slower growth compared to the previous quarter (2Q).

“Meanwhile, the volume index for wholesale and retail trade posted a slower growth of 6.1% YoY to 133.5 points in August 2019, slower from 6.3% YoY gain in July 2019.

“The descending trend on the index suggests moderate services sector as well as private spending in the 3Q,” said the economist.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said Malaysia’s 3Q GDP is expected to reach 4.3%, driven by private consumption, a driver which has been growing at a strong pace since the 2Q18.

Malaysian Institute of Economic Research (MIER) in its recent survey said consumer sentiment index has declined to 84 points in the 3Q from 93 points in the preceding quarter.

MIER added that consumers have been less enthusiastic as current finances are less favour-able and other factors include weak job outlook, anxiety over rising prices as well as limited shopping plans following weak purchasing power.

“In that sense, domestic spen-ding momentum would not be as robust as in the previous quarter while the external sector continues to be affected by global uncertainties,” he said.

Many countries in the region are already revising their growth forecast as worries of economic slowdown would drag their economies. Singapore has forecast a 0% to 1% economic growth for 2019, while Indonesia recently cut its borrowing rates to boost the economy.

Thailand has also revised downwards its economic growth from 3.3% to 2.8%. However, the Thai baht is among the world’s best performing currencies, helped by the country’s US$220.5 billion (RM918.5 billion) in foreign reserves.