Malaysia’s growth slowed less than expected after overseas shipments and factory output held up, providing some measure of support for an economy facing faltering investment and higher costs.
GDP rose 4.5 percent in the three months through December last year from a year earlier, after climbing 4.7 percent in the previous quarter, the government said in a statement yesterday.
That compares with a 4.1 percent median estimate in a Bloomberg News survey.
Photo: Reuters
The economy grew 5 percent last year.
The ringgit fell more than any other Asian currency against the US dollar last year, making Malaysia’s goods more attractive to buyers in overseas markets. That is countered by a slump in crude that has curbed government revenues and prompted Malaysian Prime Minister Najib Razak to trim the growth forecast for this year, while rising costs deter business investment.
“We are far from upbeat about the prospects for Malaysia this year,” said Krystal Tan of Capital Economics Ltd. “The effects of low commodity prices will continue to feed through into the real economy, curtailing investment in the energy sector, keeping commodity export income weak and hurting fiscal revenue.”
The ringgit gained 1.3 percent against the US dollar in Kuala Lumpur yesterday, extending its advance after growth and the current-account surplus figures beat estimates. The Malaysian currency has appreciated about 3.2 percent against the US dollar this year, rebounding after a 19 percent decline last year.
Bank Negara Malaysia left interest rates unchanged for a ninth meeting last month, while cutting the amount of cash banks must set aside as reserves for the first time since 2009 to boost funds in the financial system.
The central bank yesterday warned that the economy is expected to face a “challenging operating environment” with domestic demand projected to slow down.
“While the growth in income and employment continues to support private consumption, it is expected to moderate as households continue to adjust to the higher cost of living,” it said in a statement. “The downside risks to growth will however remain, given the continued uncertainty in the external environment and the on-going reforms in the domestic economy.”
Growth is expected by the government to be 4 to 4.5 percent this year, compared with an earlier projection of as much as 5 percent. Inflation is projected to rise 2.5 to 3.5 percent this year, higher than a forecast of 2 to 3 percent in October last year.
A key consumer confidence gauge fell to a record low last quarter and households are turning more negative in their financial outlook for the first half of this year.
The government agreed to delay a plan to double foreign worker levies after companies protested the move, saying it would raise the cost of doing business amid an already difficult operating environment.
“Malaysia is unlikely to be able to sustain its mojo in 2016,” said Weiwen Ng, an economist at Australia & New Zealand Banking Group Ltd in Singapore. “The balance of risks in 2016 are skewed towards growth disappointment and fiscal slippage with inflation pressures of second order concern. Structurally lower oil prices means that Malaysia will still be confronted with significant growth and fiscal headwinds.”
Exports rose 3.7 percent in the fourth quarter from a year earlier, after gaining 3.2 percent in the previous three months, the statistics department said. Manufacturing expansion quickened to 5 percent, and electrical and electronic products had “sturdy growth,” it said.
Private consumption expenditure climbed 4.9 percent last quarter from a year ago, accelerating from 4.1 percent in the previous period. Private investment growth slowed from 5.5 percent to 5 percent in the third quarter.
“Private investment is projected to moderate to below its long term trend, but will nevertheless be supported by the capital expenditure in the manufacturing and services sectors, as well as the implementation of infrastructure projects,” the central bank said.
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