Malaysia’s economy grew at the fastest pace in 2 1/2 years last quarter as Prime Minister Najib Razak boosted spending ahead of an election that will test his grip on power.
Gross domestic product rose 6.4 percent in the three months through December from a year earlier, after a revised 5.3 percent gain in the previous quarter, the Statistics Department said in a statement in Kuala Lumpur today. That compares with the median estimate of a 5.5 percent advance in a Bloomberg News survey of 21 economists. The economy grew 5.6 percent last year.
Asian nations from Indonesia to the Philippines have shown resilience to the faltering global economy as local demand rises. Najib has increased government expenditure ahead of elections that must be held by late June, extending cash handouts to low- income families and raising civil servants’ pensions as part of a 251.6 billion ringgit ($81 billion) budget for this year.
“Domestic demand has been strong” led by investment and consumption, Santitarn Sathirathai, an economist at Credit Suisse Group AG based in Singapore, said before the report. “Malaysia will be among the first central banks in Asia to shift toward a more hawkish bias, perhaps after the general election.”
Malaysia’s government forecasts the economy will expand 4.5 percent to 5.5 percent this year. Domestic demand is expected to continue to expand, led by the private sector, the central bank said last month, adding improving global demand will provide additional support this year.
Najib, whose ruling coalition won the 2008 vote by its narrowest margin in five decades, must dissolve parliament by April 28 for polls to be held within 60 days. The general election may be conducted in April as the prime minister still needs “a week or two” to complete matters including campaign manifestos and candidate lists before dissolving parliament, the Star reported today, citing an unidentified party official.
The FTSE Bursa Malaysia KLCI Index has fallen 4.8 percent after hitting a record on Jan. 7 on concern that Najib’s governing National Front alliance may lose seats in parliament. The ringgit has fallen about 1.2 percent this year, among the worst performers within a basket of 11 Asian currencies tracked by Bloomberg. The ringgit rose 0.4 percent against the U.S. dollar to 3.0965 as of 5:28 p.m. in Kuala Lumpur.
Malaysia’s central bank joined neighbors including Indonesia in maintaining interest rates this year as an accelerating economy and the lowest inflation among Southeast Asian major economies reduced the need for monetary policy action. The Bank of Thailand kept its interest rate unchanged for a third straight meeting today as economic growth quickened.
Consumer prices in Malaysia rose 1.3 percent in January, after a 1.2 percent gain in December, the Statistics Department said today. The central bank kept its benchmark overnight rate unchanged at 3 percent for a 10th straight meeting on Jan. 31.
Services rose 6.3 percent in the September-to-December period from a year earlier after climbing 7 percent in the third quarter, today’s report showed. Construction gained 18.1 percent last quarter, after an 18.3 percent pace the previous period.
Exports of goods and services slid 1.5 percent in the fourth quarter from a year earlier, after falling 3 percent in the third quarter in 2012, according to the report today.
Malaysia’s export-dependent economy remains vulnerable to fluctuations in global demand as the U.S. debates spending cuts and Europe continues to struggle with a debt crisis. Still, the government expects overseas shipments to improve this year for exporters of goods including automotive components, commodities and semiconductors. Exports of goods may rise 2 percent to 4 percent in 2013, Trade Minister Mustapa Mohamed said Feb. 8.
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