Malaysia Q3 economic growth likely to expand, weak exports to pose downside risks

The economic growth of Malaysia is expected to have expanded during the third quarter of this year, but possess downside risks, following weak performance in the export sector. However, marginal easing in import demand could well moderate the pressure on the external balance.

Malaysia’s gross domestic product (GDP) and industrial output, due to be released this week are expected to register an expansion of 4.4 percent y/y and 4.5 percent y/y respectively. While the latter is a moderation from 4.9 percent previously, it is still a strong showing considering the average 3.5 percent pace over the first half of the year, DBS reported.

Domestic demand remains the key driver of growth although some softening in private consumption can be expected judging from the conditions in the labour market. However, the dull growth outlook is already exerting an impact on the labour market. The overall unemployment rate has inched up while job vacancies have dipped.

Despite the uncertainties in the global environment, a resilient performance in the manufacturing sector essentially means that the downside risk on GDP growth will be moderated.

"We continued to maintain a GDP growth forecast of 4.2 percent for the full year," DBS commented in its latest research note.