The gross domestic product (GDP) of Malaysia is expected to moderate to below 6 percent for the third quarter due to softening business conditions and higher import growth as compared to exports, according to the Malaysian Institute of Economic Research (MIER).
But the independent think tank forecasts the full-year GDP to be above the socially efficient level of 5.5 percent to register at 5.7 percent, said a report from Malaysia’s national news agency Bernama.
MIER executive director Zakariah Abdul Rashid said that the full-year outlook is buoyed by a strong first-half performance, and that the momentum is expected to continue through next year.
“The growth will be surprisingly higher and output gap is positive, pointing to strong demand,” Zakariah said at a media briefing on the organization’s “Malaysian Economic Outlook: 3rd Quarter 2014 Update.”
The GDP for the first and second quarters stood at 6.2 percent and 6.4 percent, respectively, resulting in the first-half GDP of 6.3 percent.
Zakariah said there will be strong contributions from external demand this year, while moderating domestic demand will remain the key driver of growth.
He continued that the business condition index (BCI) for the third quarter declined to 95.9 points, down 17.1 points from the previous quarter. The BCI is conducted on a quarterly basis to assist in assessing the short-term outlook for the economy.
“The decline in the BCI was attributed to the significantly lower sales, drop in new domestic and export orders, less vibrant manufacturing activities and piling up of stocks,” he said.
Consumer sentiments index also fell below 100 points to 98 points in the third quarter, dragged down by current and expected income.
But business conditions are forecast to improve in the fourth quarter with projected higher export sales, he said.
Zakariah said the current account surplus of balance of payments (BOP) is also projected to improve moderately this year, supported by strong merchandise balance, especially in the first half, offsetting declining commodity prices such as those of palm oil and rubber that have caused lower exports of processed and raw commodities.
With improving financial account, the overall BOP is expected to strengthen in 2014 and 2015, he said.
Globally, MIER said, the world’s economic growth is expected to strengthen in the second half of this year, driven by strong recovery in key advanced economies such as the U.S. and UK.
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