Faster growth supported by higher exports and continued strength in private domestic demand
KUCHING: Malaysia’s economy resume its upward trend with the gross domestic product (GDP) growth for the second quarter of 2014 (2Q14) expanded by 6.4 per cent. The growth rate in 2Q14 is faster than the 6.2 per cent growth achieved in 1Q14.
Bank Negara Malaysia (BNM) in a statement yesterday said the strong growth registered in 2Q14 was supported by higher exports and continued strength in private domestic demand.
On the supply side, BNM noted growth in major economic sectors remained firm, supported by trade and domestic activity.
On a quarter-on-quarter seasonally adjusted basis, the economy grew by 1.8 per cent.
The central bank said exports and private sector activity remained the key drivers of growth during the quarter.
“On the supply side, growth in major economic sectors remained strong. The services sector recorded sustained growth, supported mainly by the trade-related sub-sectors.
“The manufacturing sector expanded at a faster pace underpinned by the electronics and electrical cluster, particularly semiconductors.
“The construction sector expanded at a more moderate pace, driven mainly by the residential and non-residential sub-sectors. Meanwhile, the agriculture sector registered strong growth, reflecting higher production of palm oil.
“The mining sector turned around to record positive growth, due mainly to higher production of both natural gas and crude oil,” BNM said.
On this point, M&A Securities Sdn Bhd in a report yesterday said policies implemented by Prime Minister Datuk Seri Najib Tun Razak have proven to be successful.
“Najibnomics is working. After the bold services and financial sector liberalization, Malaysian economy has been firing full cylinder.
“1H14 GDP of 6.3 per cent can be described as solid as it exceeded Ministry of Finance (MOF) and BNM full year projection of 5 – 5.5 per cent and 4.5 to 5.5 per cent respectively.
“Ostensibly, export has been the tonic for 2Q14 impressive GDP performance as steady economic recovery by advanced countries has pushed demand for our products.
“Looking at all the critical factors, Malaysia is on the right track to register solid GDP performance this especially when first half average has been better-than-expected. “Hence, we revise upward our full year 2014 GDP by 50 basis points to 5.5 per cent.
“We believe many others would compel to do so as there is no downside risk to growth except if ringgit gains traction faster-than-expected,” the research firm said.
Meanwhile, BNM observed that private investment continued to register double-digit growth, expanded by 12.1 per cent albeit at a slower rate as compared with 14.1 per cent in 1Q14, reflecting investments in the services and manufacturing sectors.
Private consumption increased by 6.5 per cent in 2Q14 as compared with 7.1 per cent in 1Q14, supported by stable employment conditions and continued wage growth.
In contrast,public sector expenditure declined 2.1 per cent against 2.7 per cent in 1Q14.
Public consumption declined marginally by 1.3 per cent, reflecting lower government spending on emoluments, and supplies and services.
Public investment declined by 3.3 per cent versus a contraction of 6.4 per cent in 1Q14 due to lower spending on fixed assets by both the federal government and public enterprises.
As for the movement of the ringgit, BNM observed that the ringgit and most other regional currencies appreciated against the US dollar as sound regional growth prospects and the continued highly accommodative monetary policy in the US sustained investor interest in regional financial markets.
The central bank noted positive sentiments following the release of better-than-expected domestic economic data, particularly the strong first quarter economic growth and a stronger pace of export growth, also supported the ringgit.
Subsequently, BNM said the overall balance of risks for the global economy thus remains biased towards the downside due to uncertainty over policy adjustments in the key economies as well as geopolitical developments.
The central bank noted persistent geopolitical tensions in Eastern Europe and the Middle East could heighten financial market volatility and weigh down on the ongoing global economic recovery.
“For the Malaysian economy, growth of exports is expected to moderate slightly in the second half of the year, partly reflecting the significant base effect in the corresponding period in 2013.
“Nevertheless, leading indicators suggest that private sector activity will remain as the key driver of growth.
“Exports will continue to benefit from the recovery in the advanced economies and from regional demand.
“Going forward, the Malaysian economy is expected to remain on a steady growth path,” BNM envisaged.