Malaysia’s 3Q GDP exceeds expectations, fastest growth in three years — Analysts

KUCHING: Malaysia’s third quarter of 2017 (3Q17) gross domestic product (GDP) generally exceeded consensus’ and analysts’ expectations.

It was the first time since 2Q14, Malaysia’s quarterly GDP growth reached above six per cent.  Of note, last week, Bank Negara Malaysia (BNM) announced Malaysia’s GDP growth for 3Q17. Malaysia’s GDP growth expanded by 6.2 per cent year-on-year (y-o-y) in 3Q17.

Private consumption and total investment contribute 3.9 and 1.7 per cent respectively to the robust growth during the quarter while from supply side, services and manufacturing sectors contributed significantly larger amount to the GDP by 3.6 and 1.6 per cent respectively.

In a report, the research arm of MIDF Amanah Investment Bank Bhd commented, “We opine the upbeat momentum in GDP growth was in tandem with steady performances of industrial production, manufacturing sales, distributive trade and external trade during the third quarter.

“Moderating inflationary pressure, strengthening domestic demand and upbeat external demand are the major anchors driving up GDP performance in 3Q17.”

It also pointed out that economic growth for 3Q17 was mainly contributed by private consumption and investment with both grew solidly by 7.2 and 7.9 per cent y-o-y respectively. Improvement in Malaysia’s consumption and investment was explained by the optimism in consumer and business confidence during 3Q17.

“We noticed strong growth in distributive trade sales by 9.4 per cent y-o-y during the quarter indicates steady upbeat trend in Malaysia’s domestic spending. Stable labour market and uptick in wage growth provide a boost for private consumption.

“We opine the SEA Games 2017 which held in August this year is possibly one of major factors pushing up consumption in particular via increase in tourist expenditure. Optimism in manufacturing sector was indicated by Nikkei manufacturing PMI figure at 49.5, highest in more than two years. Notably, the PMI figure breached to 50.4 points in August,” it explained.

It also highlighted that developed and emerging economies remain on upbeat momentum for the past nine months albeit continuous strong external trade activities, modest retrieval in commodity prices and improvement in domestic spending.

It added, “The US economy expanded by 2.3 per cent y-o-y in 3Q17, while China, the second world’s largest economy rose by 6.8 per cent y-o-y beating the official growth target of 6.5 per cent.

“Among Asean economies, economic expansion in 3Q17 is seen stable staying on upward trend path. For instance, Singapore posted 4.6 per cent y-o-y during the 3Q17, highest in fourteen quarters while Indonesian economy stable growing at above five per cent y-o-y.”

Moving forward, MIDF Research foresee steady expansion pace in developed and emerging economies for the 4Q17 would continue due to sanguine economic environment, receding of protectionism threat and gradual rise in commodity prices.

All in, due to strong economic growth, averaging 5.86 per cent for the last three consecutive quarters the research team believed there is a room of possible rate hike in 2018.

“Moreover, inflationary pressure coming from uptick in fuel-related prices and further normalisation of monetary policy in developed economies are another factors for the possible rate hike next year,” it added.

In terms of Malaysia’s GDP growth, MIDF Research said, “Based on the current development and indicators, we are optimistic that Malaysia’s economy to expand by 5.8 per cent this year given the upbeat performance of domestic and global economy.

“Besides, stable labour market, continued wage growth and moderating inflation will support and spur domestic economy. Moving forward, we foresee the economic performance in the fourth quarter of 2017 to expand at slower pace.”

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