Malaysian economic growth decelerates in Q3 2019

Malaysia economic growth slowed down in the third quarter after coming in above expectations in the first half. On a year-on-year basis, the GDP growth eased to 4.4 percent, as compared with second quarter’s 4.9 percent growth. Sequentially, the GDP grew 0.9 percent, a slight deceleration from prior quarter’s 1 percent.

Private consumption, which is the main growth driver, eased to 7 percent year-on-year from second quarter’s 7.8 percent. However, its broad trajectory has stayed exceptionally strong. A combination of factors, including the delay in adjustment of the fuel subsidy mechanism and the steady to modestly higher labor force participation rate are expected to have helped, noted ANZ in a research report.

Stable private consumption alongside a positive contribution from ‘net trade’ substantially countered the deepening contraction in investment. On a year-on-year basis, investment dropped 3.7 percent, subtracting 0.9 percent from the overall growth. The public consumption’s contribution rebounded modestly.

Subdued investment activity possibly extended in the final quarter, according to ANZ. The MIER business conditions index is at its lowest level since 2008. Even if a moderately expansionary budget 2020 along with tax incentives should underpin investment in 2020, a material pick-up in exports is necessary for a considerable rebound.

‘Net trade’ positively contributed to the growth. This was greatly related to soft exports rather than a rebound in exports. This pattern is in line with the soft investment activity. The current account surplus narrowed to MYR 11.4 billion from MYR 14.3 billion previously, upon a wider deficit on the income account driven by seasonally higher dividend earnings by foreign corporates.

“The full-year current account surplus is, however, set to be higher than in 2018”, added ANZ.