According to Bank Negara Malaysia, supply disruptions in the second quarter resulted in the slower economic growth.
In comparison, GDP growth was 5.8% in the corresponding quarter of 2017 and 5.4% in 1Q2018.
In the breakdown of GDP by economic activity, the services, manufacturing and construction sectors showed growth in the second quarter while the agriculture and mining sectors of the economy went into a decline.
The services sector showed slightly improved growth with 6.5% recorded in 2Q2018 as compared to 6.3% in 2Q2017.
Growth in the manufacturing sector was recorded at 4.9%, a 1.1 percentage point drop from 6% in the same quarter in 2017.
Mining, which contracted 2.2%, fared poorer compared to a 0.1% expansion in 2Q2017.
Meanwhile, the construction sector showed a 3.6 percentage point drop in growth from 8.3% in Q2 2017 to 4.7% in the quarter under review.
Agriculture showed the most significant decline, going from an expansion of 5.9% in 2Q2017 to a contraction of 2.5% in 2Q2018.
"Growth in the mining sector contracted due mainly to unplanned supply outages, while the agriculture sector was affected by production constraints and adverse weather conditions.
"Nevertheless, major economic sectors, notably the services and manufacturing sectors, remained supportive of growth. On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 0.3% (1Q 2018: 1.4%)," said the central bank.
Headline inflation in Q2 declined to 1.3% in 2018, mainly reflecting the zerorisation of the GST rate.
"The impact from the GST zerorisation, however, was offset by higher transport inflation. Nevertheless, the fixing of RON95 fuel price since 22 March 2018 helped to contain further increase in fuel inflation during the quarter," said Bank Negara.
In the quarter under review, economic activity came to a near standstill after the government announced the dissolution of Parliament in April to pave the way for the general election on May 9.
Malaysia saw the election of a new ruling government, which completed the first 100 days of its term today.
Looking ahead, the central bank said private sector activity will continue to sustain growth.
"Positive labour market conditions and capacity expansion will continue to support robust private consumption and investment respectively."
It added that headline inflation is expected to moderate depending on the pass-through from changes in the consumption tax policy while underlying inflation is expected to remain relatively stable due to sustained private sector spending.
"Malaysia’s macroeconomic fundamentals remain strong, and thus provides the country with the requisite buffers to effectively manage potential shocks to the economy," said Bank Negara.
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