Malaysia GDP Growth Beats Estimates as Private Sector Held Up

  • Analysts see space for additional stimulus from central bank
  • Central bank says ringgit volatility to persist on uncertainty

Downtown Kuala Lumpur.

Photographer: Mohd Rasfan/AFP via Getty Images

Malaysia’s economic expansion beat estimates as private consumption growth quickened, helping counter weak government spending.

Key Points

* Gross domestic product rose 4.3 percent last quarter from a year earlier, after climbing 4 percent in the previous three months, Bank Negara Malaysia said in Kuala Lumpur Friday.
* The median estimate of 19 economists surveyed by Bloomberg News was 4 percent.
* GDP expanded 1.5 percent from the previous three months

Big Picture

Malaysia’s consumers and companies are now the growth pillars of the economy after a collapse in global crude prices hurt exports and curtailed the government’s ability to spend. Donald Trump’s victory in the U.S. presidential election poses a risk to Asian economies should he follow through with imposing trade barriers.

Prime Minister Najib Razak has allocated more funds for the poor and promised civil servants a bonus to support domestic consumption. The central bank delivered a surprise 25 basis-point cut in the benchmark overnight policy rate in July and lowered the amount of cash that banks must set aside as reserves earlier this year.

Economist Takeaways

* “Weak export sales could likely be the main drag,” Irvin Seah, a senior economist at DBS Group Holdings Ltd. in Singapore, wrote in a Nov. 10 report. “Amid the challenging external environment, domestic demand will likely remain the key driver of growth.”
* Malaysia’s central bank has space for two more rate cuts until the end of 2017, Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore, said before the announcement. He forecast a rate cut when policy makers meet later this month, adding that potential fluctuations in the ringgit would be among reasons affecting the decision.

Other Details

*The central bank said Friday that while growth is "currently relatively subdued," it’s projected to pick up as policy measures gain traction and global prospects improve
*The central bank also said that ringgit volatility will persist mainly due to external uncertainties including oil, China’s economic outlook and Brexit.
*Governor Muhammad Ibrahim said the ringgit will continue to be market-determined and the central bank’s role is to continue to manage extreme volatilities in the ringgit with no targeted level or predetermined path.
* Private consumption expenditure climbed 6.4 percent last quarter from a year ago, compared with 6.3 percent in the previous three months.
* Overall public sector spending rose 0.3 percent in the period, easing from 6.9 percent previously.
* Exports fell 1.3 percent in the third quarter from a year earlier

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