KUCHING: Malaysia’s gross domestic product growth (GDP) for the third quarter of 2014 (3Q14) moderated to 5.6 per cent against 6.5 per cent in the second quarter of 2014 (2Q14).
Bank Negara Malaysia (BNM) said despite the lower growth for 3Q14, the expansion of the country’s economy was supported by private sector demand and continued positive growth in net exports of goods and services.
The central bank explained yesterday that private sector activity remained the key driver of growth during the quarter.
“Private consumption registered a growth of 6.7 per cent (in 3Q14) compared with 6.5 per cent in 2Q14, supported by stable labour market conditions and continued wage growth.
“Private investment expanded at a slower pace of 6.8 per cent in 3Q14 against 12.1 per cent in 2Q14, attributed to a decline in spending on machinery and equipment, particularly in the transportation segment.
“(Meanwhile), public consumption turned positive to 5.3 per cent versus a contraction of 0.5 per cent in 2Q14, reflecting higher government spending on supplies and services.
“However, public investment declined further by 8.9 per cent compared with a contraction of 3.3 per cent in 2Q14, attributed to the near completion of a few projects by public enterprises and continued contraction in the federal government development expenditure.
“Going forward, investment activity will be supported by continued flow of ongoing and new projects by the private and public sectors,” BNM believed.
On another note, BNM observed the inflation rate, as measured by the annual change in the Consumer Price Index (CPI), averaged lower at three per cent in 3Q14 compared with 3.3 per cent in 2Q14.
The central bank explained that the decline was attributed to lower inflation in the transport category (3.7 per cent in 3Q14 against 5.4 pe cent in 2Q14), reflecting the lapse in the impact of the price adjustment made in September 2013 for RON95 petrol and diesel.
As for the performance of the ringgit, BNM said between October 1 and November 12, the ringgit depreciated against the US dollar by 2.1 per cent.
Nonetheless, the central bank noted the ringgit appreciated against the Japanese yen by 3.7 per cent and the Pound Sterling (0.1 per cent), but depreciated against the euro (0.3 per cent) and the Australian dollar (1.3 per cent).
Against regional currencies, BNM observed the ringgit strengthened against the Korean won by 2.3 per cent, but depreciated against other currencies by between 0.5 per cent and 2.4 per cent.
BNM added,”Going forward, global growth is expected to remain moderate. Growth across the advanced economies is expected to remain uneven.
“In Asia, growth will be underpinned by a continued expansion in domestic demand and exports.
“Nevertheless, there remains a considerable downside risk to global growth,” BNM said.
Those downside risk to global growth include prolonged weakness in domestic demand and low inflation in a number of major economies, uncertainty over monetary policy adjustments in the key advanced economies and persistent geopolitical tensions that could heighten financial market volatility.
While risks to growth have increased, BNM believed the Malaysian economy is expected to remain on a steady growth path.
Although exports will benefit from the recovery in the advanced economies and from regional demand, BNM observed the trend is likely to moderate reflecting both the high base effect from 2013 and lower commodity prices.
“While private consumption may moderate, investment activity will be supported by continued flow of ongoing and new projects by the private and public sectors. Going forward, domestic demand will remain the key driver of growth.”