PETALING JAYA: Malaysia’s gross domestic product (GDP) is projected to moderate further to 4.1% in the third quarter (Q3) as all key sectors to expand at a slower pace.
GDP grew 4.9% and 4.5% in Q2 and Q1, respectively. Bank Negara Malaysia, which is scheduled to release Q3 GDP on Friday, has estimated 4.3-4.8% GDP growth for 2019.
In a report, UOB Research said the slowdown in Q3 2019 is likely to be more acute given steeper declines in mining output owing to supply disruptions in the crude oil segment from maintenance shutdowns.
“The construction sector is also expected to edge into the red as construction activity across both residential and non-residential areas decline further.
“The manufacturing sector is expected to moderate given slower export-oriented production. The services sector is expected to remain resilient thanks to robust spending on food, beverage and accommodation given several public holidays in September. The agriculture sector is expected to record stable expansion based on the latest commodity data showing palm oil and natural rubber production increasing (during Q3),” it said.
UOB also noted that net exports are expected to reflect a positive contribution to overall growth in Q3 2019 albeit offset by persistent inventory drawdowns.
“Domestic demand will remain the key driver of growth albeit slower as private consumption softens and investments remain lacklustre amid lingering uncertainties and cautious business sentiment.”
The research house said it was inclined to revise down its full-year growth estimate of 4.6%, as any pick-up in the fourth quarter is unlikely to punch above 4.8%.
It said supply–side disruptions remain a drag on growth and demand indicators have softened as leading indicators point to subdued external demand amid ongoing trade uncertainties and slowing global growth.
“Private consumption remains the key anchor of growth supported by continued employment and wage growth. Although economic measures announced in the budget provide support, delays in implementation may weigh on sentiment and growth,” it added.
Finally, UOB said a further cut in the Overnight Policy Rate (OPR) of 25 basis points to 2.75% in Q1 2020 is foreseen.
“BNM underscored that it (the recent statutory reserve requirement cut) does not signal the stance of monetary policy. However, given the moderating expansion and downside risks to growth, we think BNM may pursue a policy rate cut in the coming months. As such we reiterate our view for a preemptive 25-basis-point cut in the OPR to 2.75% in Q1 20.”
