KUALA LUMPUR: Nomura Global Markets Research forecasts a slowdown in full-year GDP growth to 5.1% in 2018 from 5.9% in 2017 – below Bank Negara's 5.5% to 6.0% forecast.
Following the release of Malaysia’s Industrial Production (IP) figures for June 2018, the research house said the slowdown was expected to keep the central bank’s policy rate unchanged through this year and next.
In a statement on Friday, it said the boost to private consumption is likely to be modest beyond the second quarter and is unlikely to offset the hit to growth from significant government spending cuts to offset the loss in GST revenue.
Malaysia’s IP growth fell to 1.1% year-on-year (y-o-y) in June from 3.0% in May, while on a seasonally adjusted basis, it fell by 1.0% month-on-month (m o-m), more than reversing the growth of 0.2% in May.
The drop was led by a sharp decline in mining IP growth to -9.4% y-o-y in June from -0.5% in May.
This offset a slight pick-up in manufacturing IP growth to 4.5% in June from 4.1% in May, in line with the pick-up in June manufactured export volume growth.
Within manufacturing, the growth in the electrical & electronics segment rose to 5.4% from 4.8% from May.
Overall for the second quarter, IP growth fell to 2.8% y-o-y from 3.9% in Q1, while crude palm oil production growth declined sharply to -6.4% in Q2 from 12.6% in Q1.
“Despite the return of fuel subsidies in March and the zero-rating of the GST in June, retail trade volume growth rose only modestly to 8.1% in Q2 from 7.5% in Q1,” it noted.
Taking these and other activity data into account, the research house said it estimates GDP growth is tracking at 4.7% y-o-y in Q2, below its previous estimate of 5.0% and a sharper slowdown from 5.4% in Q1.