Malaysia's growth is expected to have weakened in 4Q15

Malaysia's headline number is expected to register 3.8% YoY this week, down from 4.7% previously. The economy is likely to have grown by 4.8% in 2015. Moderation in domestic consumption coupled with easing on the external front had weighed down on the headline number. 

GST and its associated inflationary impact will likely take a toll on consumption growth. Private consumption growth has already eased 3Q15 and is expected to moderate further. Beyond the head-on GST effect on consumer spending, sentiment is also cooling amid an increasingly uncertain employment prospects and a negative wealth effect from falling commodity prices. 

A weaker ringgit has crimped import demand and boosted export performance. But global demand has been weak and the income effect will likely override the lift from the undervalued currency. 

"Although full year GDP growth for 2015 will still be on track to meet our long held forecast of 4.8% for the year, a challenging external environment will likely set the backdrop for a protracted period of sluggish growth in 2016. Our forecast for 2016 remains at 4.5% but there is downside risk to this projection", notes  DBS Group Research.