KUALA LUMPUR: Malaysia's economic growth, as measured by gross domestic product (GDP), for the second quarter ended June 30 rose by an unexpected 5.4% year-on-year, underpinned by an expansion in manufacturing and robust domestic demand.
GDP growth for the first quarter was revised to 4.9% from 4.7%, while growth for the first half of the year stood at 5.1% compared with the same period a year ago. Compared with the first quarter, GDP expanded by 3%.
In the supply side of the economy, only the agricultural sector saw a contraction due to lower crude palm oil production. Manufacturing, services, construction and mining all posted growth. Domestic demand jumped 13.8% for the quarter and rose 11.8% for the first-half.
The country's second-quarter GDP numbers came as a surprise to many economists, whose median forecast was for a 4.6% expansion. Growth for the quarter even exceeded the most optimistic forecast of 5.2%.
Zeti (far right) attending the briefing. With her are other Bank Negara officials Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said at a briefing following the release of the GDP data that the surge in private investment was the most encouraging aspect of the economy.
“Private investment has made a strong return because the investment climate has improved tremendously, with Malaysia moving up the rankings of various surveys in terms of competitiveness, costs and ease of doing business,” she said.
Zeti said the improvement was underscored by the higher implementation of investments by domestic and foreign investors. She added that civil engineering projects in the oil and gas, transport, utilities and services industries had helped spur growth in the construction sector.
By numbers, investments from the public and private sectors jumped 26.1% year-on-year for the quarter under review, with the first half rising 21.3%.
By sector, private investments rose 24.6% while public investments surged 28.9%. For the first half, private sector investments grew 22.4% while public sector investments expanded 19.5%.
Consumption rose 8.9% for the quarter and 11.8% in the first half. By sector, private consumption increased 8.8% for the quarter and 8.1% for the first half while public consumption expanded 9.4% for the quarter and 8.4% in the first half.
Zeti said monetary policy continued to be supportive of growth and that for the rest of the year, risks weighed on growth rather than on inflation with external headwinds still overshadowing the outlook.
She said it would take time for the global economy to recover and this would need action from various stakeholders.
“At this point, we're maintaining our forecast of 4% to 5% GDP growth for the year but this may change when the budget is announced (on Sept 28). This will come in at the upper range of the forecast if growth is robust,” Zeti added.
Alliance Investment Bank Bhd chief economist Manokaran Mottain has revised GDP growth for the year to 4.7% from 4.5% previously, with the second half to record growth of 4.5%.
He told StarBiz the third quarter would see expansion at its slowest.
Manokaran said despite the surprising growth figures, the global and domestic economy's outlook for the rest of the year would still be dampened by the eurozone debt crisis, slower expansion in China and tepid growth in the United States.
“We believe the eurozone crisis will continue to have an impact on trade and this will show itself in slower exports growth,” he said.
He added that with a drop in manufacturing activity, sentiments would be affected, leading to slower growth in the domestic-oriented services sector as consumption slowed.
Manokaran said Purchasing Managers Index (PMI) for July indicated that exports would slow as demand dropped in developed markets.
CIMB Investment Bank Bhd economic research head Lee Heng Guie said in a report that the leading index for June suggested that the economy could weaken in the second half.
“We caution that a sharply high base in the second half of last year poses a hurdle to year-on-year growth,” he said.
He pointed out that the global Organisation for Economic Co-operation and Development composite leading together with regional high-frequency indicators, including trade and PMI, were still under external pressures.
Meanwhile, the Statistics Department released data showing that July prices as measured by the Consumer Price Index gained 1.4% year-on-year to 104.8 and remained unchanged compared with the previous month.
By FINTAN NG fintan@thestar.com.my The Star/Asia News Network
Economists turn bullish following better-than-expected growth in Q2
PETALING JAYA: Several economists have raised their gross domestic product (GDP) forecasts for Malaysia following better-than-expected growth for the second quarter ended June 30.
Malaysia's economic growth for the second quarter rose by an unexpected 5.4% year-on-year underpinned by an expansion in manufacturing and robust domestic demand.
GDP growth for the first quarter was revised to 4.9% from 4.7%, while growth for the first half of the year stood at 5.1% compared with the same period a year ago.
Compared with the first quarter, GDP expanded by 3%.
Hong Leong Investment Bank's (HLIB) research unit said that following the strong-than-expected second quarter data, it had raised its full-year 2012 GDP forecast to 5% (previously: 4.5%).
For the second half of 2012, HLIB Research expected GDP growth to dip to 4.5% year-on-year in the third quarter (dragged by subdued trade and manufacturing and higher base in the third quarter of 2011) before improving to 5.1% year-on-year in the fourth quarter, yielding an average of 4.8% year-on-year (first half: 5.1% year-on-year).
“We are still positive that line-up of the Economic Transformation Programme projects for the second-half and 2013 could still provide a strong support to GDP growth despite external uncertainty,” said HLIB Research.
According to Bloomberg, Goldman Sachs also raised Malaysia's GDP growth predictions to 4.6% from 3.8% for 2012, and to 5.3% from 5.2% for 2013.
Meanwhile, CIMB Investment Bank Bhd economic research head Lee Heng Guie said given the steady performance in the first half, he had raised the 2012 growth estimate to 5%, from 3.8% previously.
“However, this still implies a slower growth of 4.5% to 5% in the second half versus 5.1% in the first half,” said Lee in a report.
Lee warned that external headwinds still warranted caution as they remained hurdles to Malaysia's export growth.
Meanwhile, Maybank Investment Bank (IB) Research said its 2012 and 2013 growth forecasts of 4.4% and 5.1% respectively were under review.
“Provisionally, we expect 2012 growth to be around 5%, which implies a slightly slower growth of 4.8% in the second half as the global purchasing managers index in July signals that the global economy hence external demand will remain soft in the third quarter.”
Maybank IB Research said domestic demand would continue to be well supported by initiatives to sustain consumer spending, policies and measures to spur investments, and the roll-out and progress of big ticket infrastructure projects and capital expenditures in industries like oil, gas and energy.
By THOMAS HUONG huong@thestar.com.my The Star/Asia News Network
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