In Malaysia, Domestic Consumption is Offsetting Deterioration in Exports


Recent updates for the Malaysian economy show enduring strength in spite of the global economic downturn. Indeed, domestic demand and private and public investment continue to support the expansion.

In the fourth quarter of 2012, the GDP expanded at a faster-than-expected pace of 6.4 percent year-on-year supported mostly by the growth in Services, Manufacturing and Construction sectors. Also, steady wage growth and low unemployment continue to support household spending. Indeed, after reaching its lowest level in November of 2012, the unemployment rate decreased to 3 percent in February. On the negative side, industrial production shrank 0.2 percent in March, following a contraction of 5.2 percent in February, mainly due to a decline in output from manufacturing and mining. Moreover, in March, exports dropped for the second month in a row, and declined by 2.9 percent yoy, as a result of lower shipments of manufactured goods, palm oil and electronic goods to Japan, the EU and the USA. More importantly, the government Economic Transformation Programme, launched in 2010, aiming to push Malaysia to developed nation status by 2020, is expected to continue boosting public and private investment through 2013. Indeed, in 2012, private investment in manufacturing, services and mining sectors grew by 22 percent compared to the previous year, while public investment primary in the transport, utility, oil and gas sectors, increased by 17.1 percent. In addition, after reaching the lowest level in more than two years in December, inflation is on the rise, preventing long expected interest rate cuts.

 

In the fourth quarter of 2012, Malaysia's economy expanded 6.4 percent compared to 5.3 percent registered in the preceding three months, the highest quarterly GDP growth since the second quarter of 2010.
 
In March, industrial production contracted 0.2 percent yoy, after shrinking 5.2 percent in February. Exports declined 2.9 percent in March, after dropping 7.7 percent in February, yoy.
     

Unemployment Rate decreased to 3 percent in February. In February, Wages in Manufacturing decreased to 2667080 Thousand MYR from 2719450 Thousand MYR in January, although year-over-year, wages increased 8.3 percent.
 
The Monetary Policy Committee (MPC) decided on May 9th to maintain the Overnight Policy Rate (OPR) at 3.00 percent. In March of 2013, the Consumer Price Index (CPI) grew by 1.6 percent, compared to 1.5 increase in February.

 


Anna Fedec, anna@tradingeconomics.com
5/9/2013 12:11:59 PM