Malaysia’s 2014 economic growth fastest in four years

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KUALA LUMPUR: Malaysia’s economy last year grew at its fastest pace since 2010, expanding at an annual 6% as against 4.7% in 2013.

The 6% pace of expansion was above economists’ expectations of 5.8% as well as the World Bank’s, which had expected a 5.7% gross domestic product (GDP) growth for Malaysia in 2014. It also beat Bank Negara Malaysia’s (BNM) own estimates of between 4.5% and 5.5% in 2014.

Malaysia’s economy also recorded a better-than-expected growth of 5.8% in the fourth quarter of 2014 (4Q14) from the 5.6% pace of expansion in 3Q, underpinned by stronger private sector spending. It beat consensus forecasts of 5%.

This was also backed by positive growth on the supply side driven by the construction, services, manufacturing, and mining and quarrying sectors.

The central bank said the current account surplus narrowed to RM6.1 billion in 4Q14 from RM7.6 billion in 3Q14.

“Going forward, the Malaysian economy is expected to remain resilient to withstand the more challenging conditions in the external environment,” BNM governor Tan Sri Dr Zeti Akhtar Aziz told a news conference when announcing the 4Q14 GDP results yesterday.

The economy remains resilient as a result of the country’s diversified economic structure, supported by strong fundamentals such as low inflation, favourable employment conditions, low external debt and ample international reserves, a strong and well-capitalised banking system, and deep and well-developed financial markets, she said.

Nevertheless, Zeti said the external environment would continue to remain highly uncertain as a result of the divergence in policies across key economies, volatility in crude oil prices and the volatile capital flows and international financial markets.

While private spending consumption is expected to moderate, she is confident that the steady rise in income and employment, and the increased disposal income from lower oil prices will support household spending.

Zeti said the decline in energy prices was expected to provide some additional support to overall global growth,  as higher disposable income and lower inflation would support consumer spending.

Meanwhile, BNM’s international reserves amounted to RM405.5 billion (equivalent to US$116 billion) as at Dec 31, 2014, said Zeti.

“This reserve level has taken into account the quarterly adjustment for foreign exchange revaluation changes,” she said. As at Jan 30, 2015, the reserves position amounted to RM386.5 billion, sufficient to finance 7.9 months of retained imports and 1.1 times the short-term external debt.

Private investments also advanced by 11.2%, while larger inflows of foreign direct investments reflected sustained foreign investors’ interest in Malaysia, she said.

On the level of surplus liquidity placed with BNM, Zeti said it remained high at RM270 billion as at end-December 2014 despite a reduction in the quarter following the release of liquidity to meet greater demand for funds amid external sector outflows.

Asked about the RM2 billion loan repayment for which 1Malaysia Development Bhd is seeking a third extension from local banks, Zeti declined to comment, citing legal restrictions.

She reiterated that the central bank cannot comment on any individual or financial institution as the law does not permit it to do so.

“By law, BNM cannot comment on any individual or financial institution and we cannot comment on any depositors, no matter how large they may be.

“The law protects the individual institutions and individual deposit customers and we would be in contradiction of the law if BNM staff talk about it. We can get charged or jailed,” she added.

 

This article first appeared in The Edge Financial Daily, on February 13, 2015.