KUALA LUMPUR”•Malaysia’s economy expanded at a better-than-forecast pace in the third quarter, snapping five straight quarters of slowing, the central bank said on Friday.
Bank Negara said gross domestic product grew 4.3 percent in July-September, faster than the 4.0 percent predicted in a Bloomberg News poll as private domestic consumption offset weak government spending.
However, it warned of further economic headwinds ahead.
“Overall, while domestic conditions remain resilient, uncertainties in the external environment may pose downside risks to Malaysia’s growth prospects,” the central bank said.
Energy-exporting Malaysia has the third-largest economy in Southeast Asia, but has been grappling with falling oil prices and weak overseas demand.
Growth in the second quarter of this year was 4.0 percent, the slowest since 2009.
The country has also been rocked by a massive financial scandal centering on allegations that billions of dollars were stolen from a state investment fund overseen by Prime Minister Najib Razak, who denies wrongdoing.
In July, Malaysia unexpectedly cut interest rates for the first time in seven years to help spur growth.
In a 2017 budget unveiled last month, Najib announced new cash assistance for the poor, civil-servant pay rises to help stoke consumption, and plans for more infrastructure projects.
The World Bank has forecast Malaysian full-year growth below five percent this year
Malaysia’s consumers and companies are now the growth pillars of the economy after a collapse in global crude prices hurt exports and curtailed the government’s ability to spend. Donald Trump’s victory in the US presidential election poses a risk to Asian economies should he follow through with imposing trade barriers.
Najib has allocated more funds for the poor and promised civil servants a bonus to support domestic consumption. The central bank delivered a surprise 25 basis-point cut in the benchmark overnight policy rate in July and lowered the amount of cash that banks must set aside as reserves earlier this year.
“Weak export sales could likely be the main drag,” Irvin Seah, a senior economist at DBS Group Holdings Ltd. in Singapore, wrote in a Nov. 10 report. “Amid the challenging external environment, domestic demand will likely remain the key driver of growth.”
Malaysia’s central bank has space for two more rate cuts until the end of 2017, Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore, said before the announcement. He forecast a rate cut when policy makers meet later this month, adding that potential fluctuations in the ringgit would be among reasons affecting the decision.
The central bank said Friday that while growth is “currently relatively subdued,” it’s projected to pick up as policy measures gain traction and global prospects improve. AFP, Bloomberg
The central bank also said that ringgit volatility will persist mainly due to external uncertainties including oil, China’s economic outlook and Brexit.