Malaysia 1Q GDP Growth Slows for the Second Straight Quarter -- Update
By Yantoultra Ngui
KUALA LUMPUR, Malaysia--Malaysia's economy grew slightly slower than expected in the first quarter, just before national elections that ushered in the first transfer of power since the country gained independence from Britain in 1957.
Gross domestic product in the three months ended March 31 rose 5.4% compared with the same period a year earlier, according to the country's central bank.
That is lower than the 5.9% increase recorded in the fourth quarter last year, and the 6.2% increase in the third quarter--the highest in three years. The 5.4% figure was also lower than the median 5.5% growth forecast in a Wall Street Journal poll of 11 economists.
The economic growth figures were released by Bank Negara Malaysia in the aftermath of last week's election win by Malaysia's opposition alliance. The alliance was led by 92-year-old Mahathir Mohamad, who had quit the ruling United Malays National Organization and turned against his one-time protégé, former Prime Minister Najib Razak.
Some analysts said the election result was as surprising as Brexit and U.S. President Donald Trump's 2016 election victory. Now Malaysia's prime minister, Mr. Mahathir plans to reopen investigations into a multibillion-dollar embezzlement scandal at state investment fund 1Malaysia Development Bhd. implicating Mr. Najib. Both the fund and Mr. Najib--who has been barred from leaving the country--deny any wrongdoing.
On a sequential basis, a closer measure of the economy's recent momentum, Malaysia's economy grew 1.4% in the first quarter from the preceding three months on a seasonally adjusted basis.
The central bank said Thursday that growth was underpinned by private-sector activity and net exports.
Growth is expected to remain favorable in 2018, "with domestic demand continuing to be the key driver of growth," the bank said. "Growth prospects are further supported by continued positive spillovers from the external sector to domestic economic activity."
Bank Negara Malaysia Gov. Muhammad Ibrahim said the bank would assess any need for a change to its 2018 economic growth prediction of between 5.5% and 6.0% once it receives reports from the new government's advisers.
Some of Mr. Mahathir's campaign pledges included promises to abolish an unpopular goods and services tax and reinstate fuel subsidies. The new government yesterday announced the reduction of the goods and services tax to 0% from 6%, starting June 1.
Mr. Muhammad said it is too early to gauge the impact from the zero-rated GST. The central bank projected inflation to average 2-3% this year. Inflation was 1.8% in the first quarter, according to the bank.
Gross exports grew 5.8% in the first quarter, slowing from a rise of 12.4% in the fourth quarter in 2017, according to the data. Gross imports declined 0.8% compared with a growth of 14.4% in the previous quarter.
The services sector, which accounts for more than half of Malaysia's GDP, grew 6.5% in the first quarter, versus an expansion of 6.2% in 2017's fourth quarter.
Manufacturing activity grew 5.3%, slowing from a growth of 5.4% in the preceding quarter. The construction sector grew 4.9%, slowing from 5.9% growth in the previous quarter. The agriculture sector grew 2.8%, slower than the 10.7% growth in the fourth quarter.
The country's current-account surplus grew to 15 billion ringgit ($3.8 billion) in the first quarter from MYR13.9 billion in the previous quarter.
Write to Yantoultra Ngui at [email protected]