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Malaysian growth slows on lower exports
Publication Date : 24-05-2012
Malaysia's economy grew at a slower pace for the first quarter that ended in March as exports dropped amid lower demand from debt-wracked eurozone economies where consumption has fallen due to austerity measures.
Growth as measured by gross domestic product (GDP) expanded 4.7 per cent year-on-year supported by domestic demand, which rose 9.6 per cent on the back of a 7.4 per cent growth in private consumption and 5.9 per cent gain in public sector consumption.
Bank Negara governor Dr Zeti Akhtar Aziz said in a media briefing following the release of the first-quarter GDP data that growth would not be revised downwards even though concerns over the eurozone had resurfaced in recent weeks with European Union officials contemplating the possibility that Greece could exit the 17-member single-currency area.
The central bank expects the economy to grow between 4 and 5 per cent this year. Zeti pointed out that if the situation in the eurozone were to stabilise, then growth would be mid-way of the range, and should the situation improve, then growth would be closer to 5 per cent.
“This, of course, is on the assumption that there will not be a total collapse of the eurozone and we believe that the international community and the leadership of the European Union will provide the solution to their problems,” she said.
Zeti added that domestic demand was expected to remain on a steady growth path.
“The main concern now is improving the investment climate which is now beginning to yield positive results with an increase in private-sector investment activities.”
She said household spending should be sustained on the back of rising incomes, stable labour markets and access to financing.
On the supply side of the economy, Zeti said growth in the economic sectors moderated as the drop in exports growth offset the sustained growth in domestic-oriented activity.
The construction and mining sectors were the only sectors to expand on a year-on-year and quarter-on-quarter basis.
Construction grew 15.5 per cent year-on-year supported by the implementation of civil engineering projects and development of residential projects while the mining sector expanded 0.3 per cent.
The manufacturing sector expanded 4.2 per cent year-on-year, services grew 5.0 per cent, and agriculture gained 2.1 per cent. However, when compared with the previous quarter, the pace of growth for these sectors has slowed.
According to data released by the central bank, the current account surplus narrowed to 18.1 billion ringgit (US$5.72 billion) or 8.4 per cent of gross national income with the lower surplus reflecting the smaller goods surplus and larger income outflows. The goods surplus narrowed to RM32bil as import growth outpaced the expansion in exports.
Meanwhile, economists told StarBiz they remained cautious on the outlook, with several preparing to revise downwards growth expectations with unfolding events in the eurozone taking centre-stage.
CIMB Investment Bank Bhd economic research head Lee Heng Guie said the impact on Asian economies would be severe should conditions worsen.
“We remain highly vulnerable and should things get worse, then it will depend on how much of the contagion can be contained,” he said, adding that markets would remain volatile until the Greek elections were held again on June 17.
Lee said domestic demand was what was keeping Malaysia's economy afloat.
“Going forward, it will be important to carry through the momentum of private sector investment,” he said.
AmInvestment Bank Bhd economic research director Manokaran Mottain said the eurozone crisis was still evolving.
“We remain cautious as the news coming out of the eurozone is big, but how big remains to be seen as we don't know whether it will be just Greece exiting the euro or if the other peripherals will follow,” he said.
Nevertheless, Manokaran said the contagion effect would be worrying but believed that a Greek exit was still manageable if limited to just that country.
“There'll be no financial crisis in the league of Lehman Brothers as long as it does not evolve to something worse,” he said.