UOB sees Malaysia's 3Q GDP expanding at slower pace


  • Economy
  • Wednesday, 13 Nov 2019

KUALA LUMPUR: UOB Global Economics sees Malaysia's economy growing at a slower pace of 4.1% in the third quarter due to weaker readings of key data in Septmber which had fewer working days.

It said on Wednesday that based on July to September indicators, it expected slower growth in GDP compared with 4.9% in 2Q19 and 4.5% in 1Q19.

This is lower than a Bloomberg consensus poll which expects 4.4% on-year. Bank Negara Malaysia will release the 3Q GDP on Friday.

“The slowdown in 3Q19 is likely to be more acute given steeper declines in mining output owing to supply disruptions in the crude oil segment from maintenance shutdowns, ” it said.

As for the construction sector, UOB Global Economcis said it was expected to edge into the red as construction activity across both residential and non-residential areas declined further. Civil engineering activity continues to expand albeit at a slower pace pending new project restarts.

The manufacturing sector was expected to moderate given slower export-oriented production. Slower output of key industries such as electrical and electronics (3Q19: 2.9%, 2Q19: 3.8%), transport equipment and other manufactures (3Q19: 6.0%, 2Q19: 6.6%), petroleum, chemical, rubber and plastics (3Q19: 2.8%, 2Q19: 3.3%), and food, beverages and tobacco (3Q19: 1.6%, 2Q19: 4.2%) were noted.

However, the services sector was expected to remain resilient thanks to robust spending on food, beverage and accommodation given several public holidays in September.

However, indicators for retail and wholesale trade, as well as vehicle sales signal a slowdown in 3Q19. Transport and storage, information and communication are expected to ease albeit still recording high growth rates while business services and real estate are expected to remain steady.

“The agriculture sector is expected to record stable expansion based on the latest commodity data showing palm oil and natural rubber production increasing 8.6% y/y and 7.2% y/y respectively in 3Q19, ” it said.

UOB Global Economcis said despite preliminary projections suggesting that growth will trough in 3Q19, it was inclined to revise its current full-year growth estimate of 4.6% y/y as any pick-up in 4Q19 is unlikely to punch above 4.8% y/y.

“It is worth noting that supply–side disruptions remain a drag on growth whereby production of crude petroleum oils and condensates fell 12.8% y/y in 3Q19 (2Q19: -2.6%).

“A turnaround in this segment could alleviate the drag on growth. However, demand indicators have softened as leading indicators point to subdued external demand amid ongoing trade uncertainties and slowing global growth.

“Private consumption remains the key anchor of growth supported by continued employment and wage growth. Although economic measures announced in the budget provide support, delays in implementation may weigh on sentiment and growth, ” it said.

UOB Global Economcis said the recent announcement to reduce the statutory reserve requirement (SRR) by 50bps to 3.00% is to maintain sufficient liquidity in the domestic financial system.

It pointed out Bank Negara Malaysia underscored that it does not signal the stance of monetary policy.

“However, given the moderating expansion and downside risks to growth, we think BNM may pursue a policy rate cut in the coming months. As such we reiterate our view for a preemptive 25bps cut in the Overnight Policy Rate (OPR) to 2.75% in 1Q20, ” it said.


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