Malaysia’s first quarter GDP growth seen cooling on weak demand, exports

Written by on May 14, 2019

FILE PHOTO: Boats float in front of the VOPAK oil storage terminal in Johor
FILE PHOTO: Boats float in front of the VOPAK oil storage terminal in Johor, Malaysia November 7, 2017. REUTERS/Henning Gloystein

May 14, 2019

By Joseph Sipalan

KUALA LUMPUR (Reuters) – Malaysia’s economic growth pace likely slowed in the first quarter, due to tepid consumption and softer global demand as a result of the U.S.-China trade war, a Reuters poll showed.

The poll of 13 economists predicted the economy will grow at a median rate of 4.3% in January-March, slower than the 4.7% pace of the fourth quarter.

Individual forecasts ranged from 4.2% to 4.5%.

Exports from Southeast Asia’s third-largest economy contracted in February and March, and will likely face sustained pressure in the coming months as the United States pursues another round of tariff increases on Chinese goods, Capital Economics said in a research note.

“Malaysia is one of the most vulnerable countries to a drop in U.S. demand for Chinese goods, as a large exporter of intermediate goods to China,” Capital Economics said in a note on Friday.

China on Monday announced it would impose higher tariffs on $60 billion of U.S. goods following Washington’s decision last week to hike its own levies on $200 billion in Chinese imports.

Malaysia’s 2018 full-year growth came in at 4.7%, just below the government’s forecast of 4.8% but far short of the 5.9% pace set a year earlier.

The fourth quarter’s better-than-expected 4.7% rate snapped a four-quarter streak of slowing growth, but Bank Negara Malaysia (BNM) has since said it expects expansion to moderate this year.

In March, the central bank cut its 2019 growth forecast to 4.3-4.8% from an earlier projection of 4.9%, on expectations of a significant drop in export demand.

Private consumption would have remained the biggest contributor to growth in the first quarter, but likely slowed as consumer sentiment deteriorated, HSBC said.

BOTTOMED OUT

Malaysia’s consumer prices rose for the first time this year in March, gaining 0.2 percent from a year earlier. Analysts expect cost pressures to remain benign for the rest of 2019.

Standard Chartered said its softer growth forecast was also partly due to a higher base the previous year, especially when compared with the 5.4% pace set in the first quarter of 2018.

BNM cut its policy rate last week for the first time since 2016 to support the economy on heightening concerns about global growth, which Standard Chartered said would provide some support to growth.

“We expect Malaysia’s growth to have bottomed out in Q1 and see it picking up towards H2 as global growth momentum stabilizes,” Standard Chartered said in a note on Friday.

(Editing by Jacqueline Wong)

Source: OANN

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