May 15 (Bloomberg) -- Malaysia’s growth slowed to less than 5 percent for the first time in seven quarters as falling exports offset domestic consumption gains from election spending.
Gross domestic product rose 4.1 percent in the three months through March from a year earlier, after a revised 6.5 percent gain in the previous quarter, the central bank said in a statement in Kuala Lumpur today. That is lower than all 22 estimates in a Bloomberg News survey. The monetary authority kept its full-year growth forecast at as much as 6 percent.
Prime Minister Najib Razak was returned to power in a tightly contested election this month after giving handouts to the poor, higher wages for civil servants and extending energy subsidies. His efforts to boost domestic demand may help counter the impact of falling exports amid a faltering global recovery.
“The recovery in terms of exports is quite weak” and will be determined by a growth rebound in developed markets, Ho Woei Chen, a Singapore-based economist at United Overseas Bank Ltd., said before the release. “But consumption, investments will remain strong in Malaysia.”
The ringgit slipped 0.4 percent at the close today. It has risen about 2.6 percent in the past 12 months, the fifth-best performer among 11 active Asian currencies tracked by Bloomberg. The benchmark FTSE Bursa Malaysia KLCI Index has gained more than 14 percent and closed 0.3 percent lower today.
Malaysia’s central bank held its benchmark rate at 3 percent for a 12th meeting this month, even as policy makers from South Korea to Sri Lanka cut borrowing costs. “Monetary conditions remain supportive of economic activity,” Bank Negara Malaysia said in a statement today.
Malaysian exports have fallen in four out of six months through March. Inflation has accelerated this year while remaining among the slowest in the region, with consumer prices rising 1.6 percent in March from a year earlier.
The global economic recovery from last year’s slowdown has lost momentum over the past three months, with “several economies still facing significant challenges and unlikely to quickly resume normal growth rates,” Moody’s Investors Service said in a report today.
Najib today announced new Cabinet appointments following the May 5 election. Since taking charge in April 2009 during a recession, he has opened up more industries to foreign investors and implemented a minimum wage. A return to power allows the premier to advance his so-called economic transformation program aimed at drawing $444 billion in investments this decade in projects including mass rail and oil storage.
Net exports of goods and services slumped 36.4 percent in the first quarter from a year earlier, after falling 9.3 percent in the final quarter of 2012, today’s report showed.
Total consumption rose 6.1 percent in the January-to-March period from a year ago after climbing 4.9 percent in the earlier quarter, it showed. Gross fixed capital formation gained 13.2 percent, after an increase of 16 percent in the previous period.
“Domestic demand is expected to remain as the key driver of growth, driven by sustained private sector expansion and supported by the public sector,” Bank Negara said today.
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