Controlled spending lowers Malaysia’s growth to 4.2% in Q1

0
298

Starhill_GalleryMalaysia’s economy expanded 4.2% in the first quarter of this year, moderating slightly from the 4.5% recorded in the preceding quarter due to cautious spending by the private sector and to external shocks to the economy.

Despite the slowest quarterly growth since the third quarter of 2009, the country is on track to achieve its gross domestic product (GDP) growth target of 4% to 4.5% this year, Bank Negara Malaysia Governor Muhammad Ibrahim said.

On a quarter-on-quarter seasonally adjusted basis, the economy grew by 1%.

Private sector activity remained the key driver of growth, although the pace of expansion moderated amid ongoing adjustments in the economy. Private consumption expanded by 5.3% in the first quarter as compared to 4.9% in the fourth quarter of 2015, supported by continued wage and employment growth.

Private investment grew at a slower rate of 2.2% from 4.9% in the preceding quarter, mainly attributable to the cautious business sentiment and lower investment in the upstream mining sector.

On public consumption, it improved to 3.8% due to higher spending on emoluments. Meanwhile, public investments declined by 4.5% due to lower spending on fixed assets by public corporations.

On the supply side, the major economic sectors registered moderate growth. Services recorded a sustained growth amid the continued expansion in domestic demand.

In the manufacturing sector, growth was supported by the continued expansion in both export- and domestic-oriented industries, although at a slower pace.

The agriculture sector registered a contraction, as adverse weather conditions led to lower production of palm oil.

The mining sector saw a turnaround to record a marginally positive growth following an improvement in the production of natural gas.

Going forward, Muhammad said the Malaysian economy is expected to remain on a sustained growth path, meeting the target of 4% to 4.5% despite the challenging economic environment.

He projected that growth in the second half would improve on higher production in the manufacturing sector from added capacity and better commodities production as the effects of the El Nino phenomenon subside.

He also said the anticipated higher wages for civil servants and hike in minimum wages would support growth in the second half of 2016.

“Domestic demand will continue to be the principal driver of growth, sustained primarily by private sector spending. However, domestic consumption is expected to grow at a moderate pace as households continue to adjust to the higher cost of living,” he added.

Overall investment is also expected to grow at a slower pace but will remain supported by the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors.

Uncertainties in the external environment and the ongoing adjustments in the domestic economy pose downside risks to the forecast, said the central bank.

Photo: guy4versa4