Malaysia Q2 growth seen slowing again on tepid exports, investment

Malaysia’s exports fell 7.7% year-on-year in February to RM52.46bil.

KUALA LUMPUR: Malaysia's pace of economic growth is expected to have declined for a fifth straight quarter in April-June, thanks to still-weak global commodities demand and tepid private investment.

The median forecast in a Reuters poll of 14 economists was for annual growth of 4% in the second quarter, down from 4.2% in the first three months this year.

If the growth figure to be reported by the central bank on Friday is below 4.2%, April-June will be the worst period since the third quarter of 2009, when the economy contracted 1.2%.

Chief among the reasons a further slowdown is anticipated is weak net exports, hurt by anaemic global demand, according to ratings firm Moody's Investors Service.

"As a result, private investment will be weak as firms delay improving their production capacity until demand warrants it," Moody's said in a note published Aug 5.

In January-March, private investment expanded 2.2% from a year earlier, less than half the pace in the preceding quarter.

Malaysia's June exports grew 3.4% from a year earlier in ringgit terms, contrary to poll expectation of a 4.2% contraction. 
However, they continued to be weighed down by poor commodities shipments, especially for liquefied natural gas and crude oil.

RINGGIT REBOUNDS

The ringgit has strengthened about 7% this year after a bad 2015 when it plummeted more than 20% against the dollar on the collapse of global crude prices, slowing demand from top-trade partner China and a financial scandal tied to state-owned 1Malaysia Development Bhd (1MDB).

Private consumption continues to be the main driver of Malaysia's economy, though better-than-expected trade and industrial production may give an extra boost, according to Wan Suhaimie Wan Saidie, economist at Kenanga Investment Bank.

South-East Asia's third-largest economy saw June industrial production grow 5.3% from a year earlier, higher than forecast and double the increase seen in May.

However, a dip in agriculture output due to El Nino will put a drag on an expected marginal improvement in domestic consumption, said Hong Leong Investment Bank economist Ket Ee Sia.

In January, the government trimmed its full-year economic growth forecast to 4.0%-4.5% from 4.0%-5.0%. In 2015, the economy expanded 5%. - Reuters