This article first appeared in The Edge Financial Daily on May 17, 2019

KUALA LUMPUR: Malaysia’s economy grew 4.5% for the first quarter (1Q) of 2019, partly supported by a rebound in the agriculture sector as production improved after last year’s adverse weather conditions, said Bank Negara Malaysia.

At a press conference yesterday, governor Datuk Nor Shamsiah Mohd Yunus said the growth in 1Q was supported by firm private consumption growth as well as the rebound in the agriculture sector. “The growth performance was supported by continued expansion in domestic demand and a recovery in agricultural production. However, the weakness in overall investment activity had weighed on growth,” she said.

She said the agriculture sector grew 5.6% in 1Q, compared with the contraction of 0.1% in last year’s 4Q, driven mainly by improvements in the production of crude oil, amid recovery in oil palm yields, and natural rubber, which benefited from higher rubber prices.

The services and manufacturing sectors remained the key drivers of growth. Nor Shamsiah said firm household spending supported the services sector, while the manufacturing sector was supported by the recovery in domestic palm oil production. However, growth in the manufacturing sector was partly offset by the electronics and electrical sub-sector, which was impacted by slower global growth.

Meanwhile, Nor Shamsiah said the economic figures had been rebased to 2015 prices from 2010 prices following a rebasing exercise by the Department of Statistics Malaysia, reflecting the enhancement of data sources and coverage as well as methodological improvements.

Looking ahead, the central bank kept its gross domestic production (GDP) growth projection at between 4.3% and 4.8% for the year. “We expect Malaysia’s GDP growth to remain within the range of 4.3% to 4.8%, driven by private sector spending, capacity expansion in key industries and gradual recovery in the commodities sector. This has been our baseline projection since March and remains to be the case.

“It is clear that downside risks remain in the immediate horizon, stemming mainly from external factors. We will continue to monitor these risks and its implication on the overall growth trajectory,” said the governor.

In a note yesterday, UOB Malaysia senior economist Julia Goh said Malaysia’s economic growth for 1Q had exceeded expectations. The economist also anticipates a growth uptick in the second half of the year amid the revival of key infrastructure projects, policy clarity, looser monetary policy and a lower base effect. “Our estimate for 2019 GDP is 4.6%, which is in line with the central bank’s projections of 4.3% to 4.8%, but below the ministry of finance’s 4.9% estimate.

“Key risks to our growth outlook could emanate from escalating trade tensions between (the) US and China, geopolitical risks, volatile commodities and government reforms,” she wrote.

The GDP growth for 1Q has also beat OCBC Bank’s estimates, although it said the 4.5% figure, which is lower than the 4.7% expansion recorded in 4Q of 2018, indicates sluggishness in Malaysia’s economy.

“We expect 2019 to be a weak growth year for Malaysia and we continue to see the entire 2019 growth to come out at 4.4% year-on-year.

“In our view, the current data print continues to indicate slow momentum in the Malaysian economy for the coming year amid the uncertain and weak global trade environment,” wrote analyst Alan Lau.