AmBank Research expects stronger GDP in Q2

PETALING JAYA: Malaysia’s gross domestic product (GDP) is anticipated to grow at a much stronger pace in the second quarter 2018 (Q2’18), underpinned by stronger exports and imports, according to AmBank Research.
In a note today, the research house said it expects the Q2’18 GDP to grow around 5.6%-5.8% compared with 5.4% in Q1’18.
It said this is given that both imports and exports having grown faster in Q2, expanding by 8.1% and 8.3% respectively compared with Q1, added with improving manufacturing outlook based on purchasing managers’ index (PMI) data.
AmBank Group said based on the recent data, pending the industrial production data, its preliminary estimation shows a reading of 5.6% for Q2 GDP.
“Looking ahead in 2018, we noticed some optimism outlined by manufacturers though new orders remained weak partly due to the weaker ringgit. With higher output, firms increased their payrolls,” it noted.
Added with moderate inflation plus the holiday tax, it said these will bode well for private consumption and business activities, apart from the pickup in investment activities.
Nevertheless, AmBank Research said it expects domestic policy uncertainties would remain an issue.
“Still, we feel the economy should be able to register a growth of around 5.5% in 2018, which is our base case with the lower end at 5.3%.
“In our view, the challenge will be in 2019, underpinned by global issues such as a trade war, currency war, debt crisis and global monetary tightening while on the local front, it will be policy certainties. Thus, we project 2019 GDP at 5%,” it said.
Trade surplus in June shrank RM3.9 billion to RM6 billion from May’s reading of RM9.9 billion, which is the lowest trade surplus reading since May 2017, mainly due to a surge in imports.
Imports in June jumped 14.9% year-on-year (y-o-y) from a mere 0.1% y-o-y in May, bringing the Q2 average to 8.1% y-o-y against -0.3% y-o-y in Q1. The strong imports came from productive components such as capital equipment as well as intermediate goods.
“These import components are positive drivers for the GDP, suggesting the Q2 GDP momentum should be strong.
“Besides, exports also grew better in June by 7.6% y-o-y from 3.4% y-o-y in May, bringing the Q2 average to 8.3% y-o-y, which is higher than 6% y-o-y in Q1. It too should support the Q2 GDP performance more solidly,” it added.