Malaysia GDP Expands Most in Three Years

Malaysia’s economy expanded at the fastest pace in more than three years in the third quarter on private spending and foreign demand. Gross domestic product rose 6.2% year-on-year, faster than the 5.8% increase seen in the second quarter, data from the department of statistics showed Friday.

This was the fastest pace since mid-2014. The growth rate was forecast to slow slightly to 5.7%. On a sequential basis, GDP advanced 1.8% versus 1.3% in the preceding quarter, Business Insider reported.

In the quarterly bulletin, the Bank Negara Malaysia said the economy is poised to register a strong growth that is close to the upper end of the official forecast range of 5.2%-5.7% in 2017.

In the budget speech last month, Prime Minister Najib Razak had forecast 5-5.5% economic growth for next year on strong domestic demand.

Alex Holmes and Krystal Tan, economists at Capital Economics, said although growth seems to have peaked, the economy should continue to grow at a decent pace over the next year, supported by robust exports and investment.

The expenditure-side breakdown of GDP showed that private consumption advanced 7.2% in the third quarter on higher spending on food and non-alcoholic beverages and communication.

Gross fixed capital formation growth accelerated to 6.7% from 4.1%. The strong growth was driven by machinery and equipment.

Exports advanced 11.8% following 9.6% increase seen in the previous quarter. At the same time, imports increased 13.4% annually.

On the production side, the service sector expanded 6.6% following 6.3% a quarter ago, the statistical office said Friday. Likewise, manufacturing sector growth improved to 7% from 6%. Meanwhile, agriculture sector rose at a slower pace of 4.1% after registering a growth of 5.9% in the previous quarter.

In a separate communiqué, the statistical office said the balance of payments showed a larger surplus of MYR 12.5 billion ($3.01 billion) compared to MYR 9.6 billion a quarter ago.

The current account balance posted a surplus of MYR 2.9 billion due to further expansion in goods accounts of MYR 31.7 billion. Meanwhile, services account also contributed by registering lower deficit of MYR 4.9 billion.

The central bank said headline inflation moderated to 3.8% in the third quarter due to lower average domestic fuel prices.

Going forward, the central bank said the ringgit will continue to be driven by a confluence of external and domestic factors. These include the timing and pace of monetary policy normalization by major central banks, global geopolitical developments, and the domestic economic performance.