AmWatch - Econ Watch : Malaysia sustains robust growth in 2Q14, 18 Aug 2014

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Econ Watch : Malaysia sustains robust growth in 2Q14

The Malaysian economy registered a strong growth of 6.4% YoY in 2Q14 (1Q14: +6.2%), outperforming its regional counterparts. Meanwhile, domestic demand grew at a slower pace of 5.7% in 2Q14 (1Q14: +7.4%) owing to the contraction in public spending. Private consumption increased at a softer pace of 6.5% (1Q14: +7.1%). Growth was supported by stable employment conditions and continued wage growth. In contrast, public consumption fell by 1.3% on the back of lower government spending on emoluments, and supplies and services (1Q14: +11.2%).

Total investment had advanced to 7.2% YoY in 2Q14 from 6.3% in 1Q14, as public investment registered a slower rate of contraction. Meanwhile, trade surplus had moderated slightly to RM18.2bil in 2Q14, compared to RM18.8bil in 1Q14. Net exports accounted for 8.8% of real GDP (1Q14: +9.5%). In terms of growth though, net trades had advanced by a healthy 91.0% YoY in 2Q14 (vs. +14.9% in 1Q14). On the supply side, growth in the major economic sectors remained firm, supported by trades and domestic activities.

On a YTD basis, GDP grew by 6.3% YoY in 1H14 driven by the improvement in net trades (1H13: +4.4%). Trade surplus had advanced by a healthy 42.9% YoY in 1H14 vs. -23.7% in 1H13. We are tweaking our full-year GDP growth projection upwards by 0.4ppt to 5.7% for 2014, owing to the higher than expected growth in 2Q14. Forward-looking indicators for the consumer segment suggest that the economy will be supported by private consumption spending in 3Q14.

As for interest rate, we expect the OPR to be retained at 3.25% during the next Monetary Policy Committee meeting on 18 September, despite the stronger than expected economic growth in 2Q14. We believe that the rate increase in July coupled with other macro prudential measures by BNM will help to ensure that the level of household indebtedness remains in check.

Others :

Economic Update (2) : Current account softens to RM16.0bil in 2Q14

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