Malaysia’s gross domestic product grew 4.2% in the first quarter of 2016, its slowest growth since the third quarter of 2009, announced Bank Negara Malaysia Governor Muhammad Ibrahim on Friday.
The economy was dragged down by external shocks and cautious private spending, he added. However, this was still within its 4 to 4.5% target growth, which is supported by measures to boost disposable income and improve private spending, Channel NewsAsia reported.
The new central bank governor Muhammad Ibrahim, who took over from former governor Dr. Zeti Aktar Aziz earlier this month, said that the moderate growth was temporary, and was expected to improve in the second half of 2016 on the back of higher manufacturing and improved commodities production.
Higher wages for civil servants and an increased new minimum wage are also expected to aid the improvement, authorities added.
According to the central bank governor, business sentiment has not been affected by issues surrounding state fund 1Malaysia Development Berhad. This is despite 1MDB’s recent debt defaults which have impacted the ringgit, making it Asia’s worst performing currency during the first quarter.
Muhammad also downplayed risks to the country’s sovereign rating.
“There were a lot of factors that influenced the cautious spending, and it had nothing to do with the issues related to 1MDB,” he said. “It’s because of the stability of our income and security of employment.”
The central bank added that the current account surplus narrowed to 5 billion ringgit ($1.24 billion) in the first three months of this year, lower than the 11.4 billion ringgit in the previous quarter.
Reserves are also strong at $97 billion, enough to cover 1.2 times of external short term debts, he said.
