Economic Update (Malaysia) - 15/05/2014

Recovery Strengthening With GDP Growth Expanding At A Stronger Pace In The 1Q

¨      Real GDP is estimated to have grown at a faster pace of 5.2% y-o-y in 1Q 2014, after rising to +5.1% recorded in the 4Q of last year. This was attributed to a recovery in exports, recording the third successive quarter of growth, on account of stronger demand from advanced economies A resilient domestic demand also provided a support to economic growth during the quarter.

¨      Real exports is estimated to have grown by 3.3% y-o-y in the 1Q, following an increase to +2.9% in the 4Q, due to a sustained recovery in global demand for the country’s exports.  Similarly, domestic demand is likely to have remained resilient and will continue to be the main engine driving growth. It is envisaged to have strengthened to 7.0% y-o-y in the 1Q, faster than +6.4% recorded in the 4Q, underpinned by a resilient consumer spending and aided by a sustained increase in private investment.

¨      Value added in the manufacturing sector is estimated to have strengthened in the 1Q, in line with a recovery in external demand, while agriculture output picked up due to a rebound in palm oil and rubber production. Mining output declined at a smaller margin in the 1Q due to a smaller decline in the production of crude oil. A slower gain in services activities and construction output, however, offset part of the gains.

¨      On the external front, the global economy will likely maintain its steady recovery trajectory, supported by accommodative monetary policy while inflation remains not a threat. The world economy is on track to chart a stronger growth in 2014 that could lift the country’s exports in the period ahead. As a result, we expect real exports to pick up pace to +4.5% in 2014, despite it falling further to -0.3% in 2013, in tandem with a pick-up in global trade volume.

¨      Although domestic demand will continue to expand at a more moderate pace in 2014, as cost pressure become more intense and macro prudential tightening measures take its toll, it will likely remain resilient and the main anchor of growth during the year.  Private investment will likely remain strong, underpinned by sustained flows of FDI investment and investments led by the Government’s initiatives and government-linked companies, despite rising cost pressure. A resilient domestic demand, alongside with a recovery in exports, will likely lift the country’s real GDP growth to 5.4% in 2014, faster than +4.7% in 2013.

Link to the report: Economic Update - Recovery Strengthening With GDP Growth Expanding At A Stronger Pace In The 1Q

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