Malaysia growth outperforms, but ANZ sceptical longer-term

KUALA LUMPUR – ANZ Bank has revise its full year 2017 GDP growth forecast for Malaysia to 5.3% (previously 4.9%) following a better-than-expected economic performance in the second quarter.

It says growth was largely driven by private consumption, which printed much stronger than expected, while fixed investment, which was the mainstay of GDP growth in the first quarter, normalised in line with expectations.

The economy expanded by 5.8% y/y in Q2, up from 5.6% in Q1. On a quarter-on-quarter seasonally adjusted basis, GDP grew 1.3% compared to 1.8% the preceding quarter.

Private consumption accounted for  54% of GDP – up 7.1% y/y and contributing 3.8% to headline GDP growth.

Gross fixed capital formation moderated 4.1% y/y, from 10.0 % in the preceding quarter, contributing 1.1% to headline growth.

ANZ says that in its recent monetary policy statement, Malaysia’s Central Bank alluded to improving growth prospects, stating that the current upturn in exports would be sustained to generate positive spill-overs into the domestic economy.

“We are, however, more sceptical on the growth front,” ANZ says.

“Although Malaysian exports have undoubtedly benefitted from strong global demand and a weaker currency, the improvement has been narrowly concentrated in the electronics segment and geographically to China.

“These characteristics do question the longevity of the export cycle, which will be critical for overcoming the legacy problems of sub-optimal capacity utilisation and poor profitability.”  www.live.anz.com (ATI).