Malaysian economy expands above expectations in Q3, likely to grow 5.5 pct in 2017

The Malaysian economic growth came in higher than market expectations in the third quarter. The economy grew 6.2 percent year-on-year and 1.8 percent sequentially, as compared with market expectation of 5.7 percent year-on-year and 1.1 percent sequentially. This is the most rapid year-on-year growth since the second quarter of 2014, implying that the economic growth continues to be strong, supported by the rise in global trade activities amidst positive spill-over impacts into its domestic environment.

Looking into the details, it is evident that the Malaysian growth has accelerated in the initial nine months of this year. In all, the growth has been mainly driven by the nation’s key growth pillars, including private consumption, trade, public sector spending and investment. Significantly, private consumption, which contributes over 50 percent to the GDP, expanded 7.2 percent year-on-year. Also, recent data indicated that industrial production expanded at a three-month average of 5.9 percent year-on-year in September.

The growth data has shown the country’s ability to accelerate further into the next year. Significantly, growth is supported by the rebound of its external environment and the transmission into its domestic environment particularly in the consumption and investment sectors. Furthermore, the central bank’s negative rhetoric in indicating its want to adjust monetary policy implies that the BNM is gearing up market expectation for an eventual rate hike in its upcoming meetings, stated OCBC Bank in a research report.

“We upgrade our full-year GDP outlook to 5.5 percent (up from 5.2 percent) for 2017, and look BNM to deliver at least a one-time rate hike into 2018 then”, added OCBC Bank.

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