Slower growth anticipated for M’sia this year

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KUCHING: Analysts across the board upheld their opinions that Malaysia will see slower growth in 2015 following Thursday’s announcement of Malaysia’s gross domestic product (GDP) for 2014.

Economist Manokaran Mottain from AllianceDBS Research Sdn Bhd (AllianceDBS Research) said the stronger growth in 4Q14 came as a pleasant surprise as it came above expectations of its projection of 5.2 per cent.

“Nevertheless, we observe various downside risks to the domestic economy that have unfolded since early of the second half of 2014 (2H14), particularly the impact from falling crude oil prices; challenges to the fiscal and current account balances and subdued growth prospects in major advanced economies besides the US,” he detailled in a note to investors yesterday.

He added that the government’s fiscal consolidation efforts were reflected in the slowdown in public sector economic growth.

However, private sector consumption growth – which makes up around 53 per cent of total GDP – increased more than expected, thereby contributing to the bulk of the growth in 2H14.

“We take note of the weak consumer sentiments index that has fallen below the 100-point threshold since 3Q14, signalling poor confidence outlook among consumers. We think that the expected slowdown in consumer spending growth might only be reflected in the quarters ahead.”

Manokaran maintained his anticipation of a slowdown in private sector consumption growth in 2015 to around 5.7 per cent on the back of higher price pressures from Goods and Services Tax implementation in April onwards.

“Although short-term lower pump prices and electricity tariffs might mitigate some short-run inflation, we expect full-year inflation in 2015 to be around four per cent,” he added.

AmResearch Sdn Bhd economist Patricia Oh similarly anticipated lower growth for 2015 as domestic demand is expected to soften, adding the firm’s full-year GDP projection at 5.2 per cent for 2015.

“As for 1Q15, forward-looking indicators for the consumer segment suggest that the economy will be supported by private consumption spending ahead of the implementation of GST,” she said in a separate report.

“Also, net trades will continue to register healthy surplus in 1Q15 as the weak Ringgit could potentially be a drag on import orders during the quarter.”

Manokaran from AllianceDBS Research said as expected, trade performance is on a downward trend as net exports of goods and services growth contracted 9.8 per cent in 4Q14, down from an expansion of 11.4 per cent recorded in 3Q14.

“While the weaker ringgit exchange rate may be able to support trade competitiveness, we still see this development to be inadequate to mitigate the expected weaknesses in exports performance.

“We maintain our projection that the current account surplus to GDP ratio would narrow to around two per cent in 2015, down from 4.6 per cent in 2014 on the back of weaker commodity exports growth.

“Overall, we think that the current economic outlook is still stable. A slowdown in economic activities is not an outright contraction. For now, we maintain our full-year 2015 GDP growth projection at five per cent.”