KUALA LUMPUR — Malaysia’s economy expanded 2.9% in the April to June period from a year earlier, growing at its slowest pace in seven quarters due to weaker exports, the country’s central bank announced Friday.
Malaysia’s gross domestic product grew 5.6% in the January to March quarter, outperforming most of its Southeast Asian peers as the country recovered from the COVID-19 pandemic. But the momentum has slowed in recent months.
Monthly trade statistics indicate weakening external demand, with June’s exports dropping 14% from the same month a year earlier. A manufacturing hub for electronics and other products, Malaysia relies heavily on trade.
Friday’s GDP figures showed that exports fell 9.4% in the second quarter, with imports also declining, down 9.7%. The growth of private consumption, which accounts for about 60% of the country’s GDP, slowed to 4.3% from 5.9% in the previous quarter.
By industry, the services sector grew 4.7%, while the manufacturing sector expanded 0.1% in the quarter, both slowing from the previous quarter’s pace.
Bank Negara Malaysia’s Deputy Gov. Marzunisham Omar told reporters on Friday: “The poor performance was affected by three factors, namely, the slow global growth, continued technology downcycle, which actually affected our export of semiconductors, and temporary factors like the weather, which affected our palm oil production, including plant maintenance affecting our production of oil refinery products.”
The bank said the continued recovery of inbound tourism partially offset slower growth in merchandise exports. Second quarter growth figures were also depressed by the rebound in the second quarter of 2022, when the economy recovered strongly following the post-pandemic reopening.
Looking ahead, Abdul Rasheed Ghaffour, the central bank governor, said Malaysia’s expansion is subject to “downside risks stemming primarily from weaker-than-expected global growth.” However, he also said there are upside factors, such as “stronger-than-expected tourism activity and faster implementation of projects.”
The central bank now expects this year’s growth rate to be “close to the lower end of the 4.0% to 5.0% range,” which is slightly more pessimistic than the previous projection in May of a “4.0% to 5.0%” expansion.
Asked whether the country can achieve the GDP target, the governor said GDP growth in the second half “will have to average [around] 3.7% to achieve [full-year growth of] 4.0%.” He added that it will continue to be driven by higher domestic demand, given the weak export outlook.
Oxford Economics said Friday the 4.0-5.0% growth target will be hard to achieve. “The external environment is likely to remain a key headwind,” senior economist Alex Holmes wrote in a note, pointing out that hopes for a boost from China are fast fading. He also pointed out that domestic demand is set to struggle for momentum, as weak exports flow through to business earnings and weigh on investment.
The central bank last month kept its key policy rate unchanged at 3.00%, following a hike in May. “Growth is still unlikely to meet the government’s 4%-5% forecast, which would likely quash any appetite at Bank Negara Malaysia for further rate hikes, and could even create a hunger for cuts,” Holmes said.
Source : NIKKEIASIA