GDP for Q2 at 5.6%-5.8%, 2019 GDP at 5%

PETALING JAYA: The economic growth in the second quarter (Q2 18) will likely expand around 5.6%–5.8% but the challenge for the gross domestic product (GDP) growth will be in 2019, according to AmBank Group.

Its chief economist Anthony Dass said on Monday he believe the economic outlook in Q2 18 should stay healthy, likely to expand around 5.6%–5.8%. 

“The bank is of the view that the economy will grow around 5.5% for the full year of 2018 with the lower end of our base case GDP growth projection at 5.3%. 

“Growth will continue to be supported by private expenditure and exports reflected with evidence of higher output and new export orders. In our view, the challenge to the economic growth will be in 2019. 

“Ongoing global issues such as trade war, currency war, risk of emerging market debt crisis and global monetary tightening, added with domestic challenges could weigh on potential GDP outlook. Thus, we project 2019 GDP at 5.0%,’’ he said.

Meanwhile, the bank noted that the June industrial production (IP) unexpectedly slowed by 1.1% y-o-y from 3.0% y-o-y in May, dragged by mining which fell 9.4% y-o-y from -0.5% y-o-y in May. 

However, the better output growth from manufacturing and electricity, up 4.5% y-o-y and 3.0% y-o-y respectively in June compared to 4.1% y-o-y and 2.6% y-o-y respectively in May, contained the downside on IP.

Hence, Dass said he found the Q2 growth from IP averaging 2.9% y-o-y was slower than the 3.9% y-o-y reported in Q1. Q2 average growth presented by manufacturing cooled to 4.7% y-o-y from 5.2% y-o-y in Q1 although manufacturing sales grew faster in Q2 by 7.2% y-o-y from 6.5% y-o-y in Q1.
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Besides, he said the Purchasing Managers Index (PMI) improved to 49.5 in June although it was still below the 50 threshold level, reflecting a softer contraction in output and new orders from 47.6 in May with July’s reading at a five-month high of 49.7.

Adding on, it noted that exports grew stronger in Q2 by 8.3% y-o-y from 6.0% y-oy in Q1. Also, imports rose 8.1% y-o-y in Q2 from -0.3% y-o-y in Q1. Retail sales gained 9.8% y-o-y in Q2 from 9.2% y-o-y in Q1.