Malaysia’s 3Q GDP to grow between 4.1% and 4.4%

Slower growth is anticipated due to declining mining activity and broad-based moderation in other sectors

by SHAZNI ONG & AFIQ AZIZ/ pic by TMR

MALAYSIA’S economic growth for the third quarter of 2019 (3Q19) is expected to slow to between 4.1% and 4.4% from 4.9% in 2Q19, as indicators point to moderating output amid ongoing US-China trade tensions and volatility in global markets.

Bank Islam Malaysia Bhd (BIMB) chief economist Dr Mohd Afzanizam Abdul Rashid in a note on Wednesday said the country’s GDP for 3Q19 is forecast to come in at 4.3%, lower than the preceding quarter when the economy grew on higher household spending and private investment.

“The main drivers for the slower growth will be predominantly from the external sector, while the domestic engine will continue to buffer albeit at a moderate pace,” he said.

Bank Negara Malaysia is set to announce the 3Q19 performance of the country’s economy today in Kuala Lumpur.

Standard Chartered Global Research estimates Malaysia’s GDP growth to have eased to 4.4% year-on-year (YoY) in 3Q19 on a high base effect. The country’s GDP expanded by 4.4% in 3Q18.

“Private consumption, which has been the primary growth driver over the past five quarters, contributing circa 90% or more to GDP growth, surged 8.9% YoY in 3Q18,” the bank stated.

The Goods and Services Tax was removed on June 1, 2018, and the Sales and Services Tax was re-introduced only on Sept 1, 2018.

Hong Leong Investment Bank Bhd in a note on Wednesday said it expects 3Q19 GDP to expand 4.4% YoY following the release of various indicators.

“Growth is anticipated to be slower due to declining mining activity, and broad-based moderation in other sectors.

“Downside risks to growth remain as prolonged trade tensions and soft global demand could lead to continued cautiousness in investment and trade activities,” the firm said.

Meanwhile, Economic Affairs Minister Datuk Seri Mohamed Azmin Ali hinted that “some challenges” might hinder the quarter’s growth.

“Of course we enjoyed quite positive growth in the 2Q. But we would expect some challenges for 3Q and 4Q this year,” Azmin told reporters after addressing top civil servants on the Shared Prosperity Vision 2030 at the Ministerial Forum Series in Kuala Lumpur yesterday.

“We will see tomorrow’s announcement. I do not want to pre-empt the announcement of our new growth rate for the 3Q,” he said, declining to comment further on the matter.

Additionally, Azmin said it is crucial for the government and civil servants to work hard and ensure political stability.

“The mandate given in the last election is for us to deliver and the change was unprecedented.

“We have to work very hard to recalibrate economic policies to address our economic issues and the main challenges globally with China and the US as trading partners.

“This is an opportunity for us to be more competitive, and we can address the huge markets in Asean countries. We have 650 million people in this region and there is a lot of opportunity for us to increase our trade,” he said.

Bursa Malaysia Derivatives Exchange ended its trading yesterday softer in line with other Asian stocks following China and Japan’s weaker economic data, signalling the ongoing US-China trade war had badly impacted some of the world’s biggest economies.

However, the losses were capped by buying in small caps, lower liner and plantation stocks. The benchmark FTSE Bursa Malaysia KLCI fell 3.67 points to 1,593.55 from 1,597.22 recorded at yesterday’s close.