KUCHING: Malaysia’s economy expanded by 4.2 per cent as measured by gross domestic product (GDP) in the first quarter of 2016.
Bank Negara Malaysia (BNM) yesterday said the slight moderation in growth reflected external shocks to the economy and cautious spending by the private sector.
The central bank in a statement added private sector activity remained the key driver of growth in 1Q16 although the pace of expansion moderated amid on-going adjustments in the economy.
“Private consumption expanded by 5.3 per cent as compared with 4.9 per cent in the fourth quarter of 2015 (4Q15) – supported by continued wage and employment growth,” it said.
“However, private investment grew at a slower rate of 2.2 per cent against 4.9 per cent in 4Q15.” The central bank explained that the lower growth in private investment was attributed to the cautious business sentiments and lower investments in the upstream mining sector.
In addition, BNM noted growth of public consumption improved to 3.8 per cent in the first quarter versus 3.3 per cent in 4Q15 due to higher spending on emoluments.
On the other hand, public investment declined by 4.5 per cent as compared with 0.4 per cent in 4Q15 due to lower spending on fixed assets by the public corporations.
“On the supply side, growth continues to be driven by major economic sectors which registered moderate growth performances,” it added.
“The services sector recorded a sustained growth on account of the continued expansion in domestic demand.”
In the manufacturing sector, growth was supported by the continued expansion in both export and domestic-oriented industries, although at a slower pace.
“The agriculture sector registered a contraction, as adverse weather conditions led to lower production of palm oil.
“The mining sector turned around to record a marginally positive growth following an improvement in the production of natural gas,” BNM said.
On a quarter-on-quarter (q-o-q) basis, the central bank said the country’s economy recorded a growth of one per cent as compared to 1.2 per cent in 4Q15.
Moreover, BNM said the global economy expanded moderately against a backdrop of high financial market volatility in 1Q16.
The central bank observed advanced economies continued to register modest improvements, as the pace of growth remained constrained by crisis-related legacies, including high indebtedness and labour market slack.
In Asia, BNM also observed the economic activity expanded at a more moderate pace due in part to the weakness in exports.
Amid those developments, the central bank noted several economies adopted more stimulus to support growth.
Commenting on the local economy, BNM said, “Going forward, the Malaysian economy is expected to remain on a sustained growth path of 4 – 4.5 per cent, despite the challenging economic environment globally and domestically.
“Domestic demand will continue to be the principal driver of growth, sustained primarily by private sector spending.
“However, domestic consumption is expected to grow at a moderate pace as households continue to adjust to the higher cost of living.
“Overall investment is also expected to grow at a slower pace but will remain supported by the implementation of infrastructure development projects and capital spending in the manufacturing and services sectors.
“Uncertainties in the external environment and the on-going adjustments in the domestic economy pose downside risks to growth,” the central bank said.
Nonetheless, it believed the overall downside risks to the global economy remain elevated.
The central bank pointed out that cyclical and structural economic weaknesses continued to weigh on growth in the major economies, in addition to uncertainty in the direction of energy prices and rising geopolitical risks.
“Looking ahead, although the global economy is projected to improve, the pace of expansion is expected to be moderate and uneven.
“In most of Asia, growth will be underpinned by domestic demand with continued policy support, the central bank believed.