Friday 29 Mar 2024
By
main news image

KUALA LUMPUR (May 22): Malaysia’s growth momentum is expected to slow in the remainder of 2017 after recording a 5.6% of gross domestic product (GDP) growth in the first quarter of the year (1Q17), said Standard Chartered Global Research.

In a report today, the bank’s ASEAN economic research head Edward Lee and Asia economist Jonathan Koh said they expect China’s demand to slow in the coming months amid deleveraging and property cooling measures.

“Malaysia’s exports started 2017 strongly, in part boosted by the recovery in commodity prices and a pick-up in external demand. China was a key driver of the export boost.

“Based on direct exports, China has accounted for close to 25% of the 21% increase in exports so far this year. However, we expect China’s demand to slow in the coming months amid deleveraging and property cooling measures,” they said.

Nevertheless, the research bank raised its GDP forecast for Malaysia to 4.6% from 4.1% for 2017.

Lee and Koh said resilient domestic consumer spending was a surprise, and private consumption remains strong despite higher inflation, high household leverage and weaker labour metrics.

“Malaysia reported strong 1Q17 GDP growth of 5.6% year-on-year (and) quarter-on-quarter growth was also impressive at 1.8%, the fastest since 4Q12.

“Given the strong start to the year, we raise our full-year growth forecast to 4.6% from 4.1% previously. However, this implies that we believe growth momentum may have peaked in 1Q17,” they added.

They noted that real wage growth, which fell into negative territory, and household debt at 90% of the GDP are likely to weigh on private consumption going forward.

“Furthermore, we expect an unfavourable base effect in the second half of the year (2H17) due to the introduction of consumption-supportive measures in 2H16,” they added.

Lee and Koh said investments were also `surprisingly strong’ although loan growth (excluding lending to the household sector) rose only 6.2% year-on-year in the quarter.

“We believe foreign direct investment supported investments with inflows in 2016 up 48% year-on-year over 2015 but the four-quarter moving average of foreign direct investment eased to 12.2% year-on-year in 1Q17.

“Moreover, construction projects awarded fell 54% year-on-year in 1Q17. Hence, we expect growth to slow in the remainder of the year although we raise our full-year growth forecast,” they added.

      Print
      Text Size
      Share