Economists see softer Q1 GDP growth in M’sia

Tuesday May 14, 2013

By EUGENE MAHALINGAM
eugenicz@thestar.com.my

Private consumption and investment will continue to support growth

PETALING JAYA: Malaysia’s economy may have softened in the first quarter this year on weaker exports due by poorer external demand, while private consumption and investment will continue to support growth.

Economists expect the country’s gross domestic product (GDP) growth in the first three months of the year to be lower than the 6.4% achieved in the preceding quarter.

“Given the softening external environment due to the downturn in Europe and the lower-than-expected growth in the US and China, we expect Malaysian exports to be weaker due to softening external demand,” said RAM Ratings chief economist Dr Yeah Kim Leng.

“Despite strong domestic demand spurred by domestic consumption and rise in investments, we expect the GDP to moderate to 4.7% in the first quarter,” he said.

Yeah said that lower industrial production in the first quarter would also contribute to the less-than-stellar GDP numbers.

Malaysia’s industrial production index declined 0.2% in March versus a year earlier due to a dip in the manufacturing and mining indices.

MIDF Investment Bank Bhd chief economist Anthony Dass expects a 6% year-on-year growth in GDP in the first quarter of 2013.

“The bulk of the growth will come from local investments. The investment cycle, comprising both public and private, is still on the uptrend in Malaysia,” he said. “We don’t see much upside in exports but imports of capital goods are still holding well.”

Dass said growth would be lower in the second quarter of the year.

“Going forward, now with elections finally over, we expect GDP growth in the second quarter to be slightly lower. We do, however, expect better growth in the third and fourth quarters.”

He added that full-year GDP growth would range between 5.5% and 5.8%.

“It would hit 5.8% only if exports pick up strongly,” he said.

Meanwhile, RHB Research Institute in a report said the country’s economic growth was estimated to have grown at a slower pace of 4.7% year-on-year in the first quarter of 2013.

“This was attributed to sluggish exports during the quarter, hurt by a recession in the eurozone and a modest growth in the US.

“Domestic demand, on the other hand, is envisaged to have remained resilient, albeit expanding at a more moderate pace in the first quarter, as businesses delayed their investment owing to the uncertainty over the outcome of the elections.”

Going forward, RHB said although significant challenges remained, it expected growing optimism on the health of the global economy.

“Indeed, the growth will likely stabilise this year and is poised for a stronger growth next year. As a result, we expect real exports to grow by 4.5% this year, albeit from a low base and after eking out a 0.1% growth in 2012,” it said.

Source: The Star

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