Malaysia's Q1 GDP growth to soften slightly to 5.5%: MIDF Research

PETALING JAYA: MIDF Research has forecast Malaysia’s gross domestic product (GDP) growth for the first quarter (1Q18) to slightly moderate at 5.5%, as economic activities maintain an upward trajectory amid of strong domestic spending and continuous surging in external trade performances.
“However, unfavourable base effects, inflationary pressure and slight deceleration in private spending will be among dragging factors in economic growth for the first quarter. As for the whole year, we remain firmly on our call of GDP to record growth of 5.5% in 2018,” the research house said today.
Based on the recently released Malaysian Institute of Economic Research (MIER) survey results for 1Q18, it said business conditions index fell below 100-threshold line at 98.6 points while consumer sentiment index improved further to 91 points, highest since 4Q14.
“The drop in business confidence could be a result of concerns over international risks such as the possibility of a trade war.”
Trade surplus widen further to RM33.4 billion, highest in eight years. Thanks to the robust external trade performance, trade surplus registered more than RM30 billion marks in 1Q18. The large size of trade surplus will translate into higher size of real trade balance and thus supporting GDP growth in the first quarter.
“We foresee the deceleration in external trade performance would drag economic growth in 1Q18.”
Overall industrial production’s average growth for 1Q18 is 3.9% year-on-year (y-o-y), higher than 3.6% registered in the last quarter. The continuous expansion is driven by sturdy growth in manufacturing and electricity productions by 5.2% y-o-y and 3.8% y-o-y respectively.
“Regional and global macro indicators are still indicating optimistic signs and therefore reflecting upbeat demand remains in global trade radar. Plus, we believe the gradual rise in commodity prices will further progress commodity-related industries in 1Q18.”
MIDF is expecting a slight slowdown for private expenditures in 1Q18. Distributive trade continued to expand at a slower pace of 7.3% y-o-y in 1Q18 as compared to 8.4% y-o-y in 4Q17.
“Main dragging factor is dipped motor vehicles sales as consumers slowed back their ramp-up spending during year-end sales in the final quarter of last year. Similarly, we foresee a decelerating pace in private investment given that key indicators such as working capital loan shrank by 17% y-o-y whereas imports of capital goods slowed to 3.3% y-o-y during the quarter.”