Malaysia registers better-than-expected economic growth, driven by private consumption

Malaysia’s better-than-expected economic performance was largely driven by private consumption, which printed much stronger than we had expected. Fixed investment, which was the mainstay of GDP growth in the first quarter, normalized in line with our expectations.

Malaysia’s economy expanded a stronger-than-expected 5.8 percent y/y in Q2, faster than the 5.6 percent in the preceding quarter. On a quarter-on-quarter seasonally adjusted basis, GDP grew 1.3 percent compared to the 1.8 percent registered in the preceding quarter. Growth was largely driven by private consumption – with a 54 percent share of GDP, rising 7.1 percent y/y and contributing 3.8ppt to headline GDP growth.

Gross fixed capital formation moderated 4.1 percent y/y, from 10.0 percent in the preceding quarter, contributing 1.1ppt to headline growth. In all, final domestic demand (including inventories) contributed 5.7ppt, while net exports added 0.1ppt to headline growth.

With regard to external balances, the current account surplus widened to 2.7 percent of GDP on a 4-qtr rolling sum basis as compared to 2.2 percent in the preceding quarter, owing to higher surplus in merchandise goods and lower deficits in the services account primary-income accounts. Services balance will be a further drain, given continued dependence on foreign service-providers, particularly in the energy sector.

"We revise our full year 2017 GDP growth forecast to 5.3 percent (prev: 4.9 percent) given the stronger-than-expected Q2 outturn. Implicit in the upward revised full year growth forecast, though, is a growth moderation in H2 of 4.9 percent y/y as compared to the 5.7 percent registered in the preceding quarter," ANZ Research commented in its latest report.