Analysts: Third quarter GDP likely to have slowed


PETALING JAYA: Gross domestic product (GDP) growth in the third quarter is likely to have slowed due to weaknesses in supply side data and in line with a synchronised global slowdown, according to economists from two research houses.

Maybank IB Research is estimating for growth to slow to 4.3% year-on-year (y-o-y) on contractions in the mining output and construction works, as well as a moderation in the manufacturing and services indices amid a relatively stable key agriculture output of palm oil and rubber.

“A decline in the mining production index from -3.3% y-o-y in the second quarter to -4.7% in the third quarter points to a drop in the mining GDP. The lower value of construction works done from +0.8% y-o-y in the second quarter to -0.6% y-o-y in the third quarter signals a contraction in the construction GDP, ” it said.

It noted further that the manufacturing production index slowed, which should translate to a deceleration in the manufacturing GDP growth.

It also noted that the index of services growth moderated for a third straight quarter, which is an indication of slower services GDP growth.

Meanwhile, the research house said output growth of crude palm oil and crude palm kernel oil and rubber was relatively stable, which hints at the same trend in the agriculture GDP.

“Demand-side indicators point to a deceleration in domestic demand to offset the stronger expansion of net external demand growth, given the surge in trade surplus, ” Maybank Research said.

The research house is forecasting for full-year GDP growth to register at 4.4% in 2019 from 4.7% in 2018.

The third-quarter’s GDP figures will be announced on Friday.

UOB said in its report that it is seeing signs of slowing GDP growth and is expecting for GDP to grow 4.1% y-o-y in the third quarter of 2019. This was lower than a Bloomberg consensus poll, which expects 4.4% y-o-y.

“We expect all key sectors to expand at a slower pace while construction and mining reverses to decline. Both private consumption and investment are expected to moderate. Net exports are expected to make a positive contribution to headline growth amid weaker imports, ” it said.

“Stock drawdowns will continue to subtract from overall growth, given the weak demand outlook, ” it added.

It noted that the country’s slower growth is in tandem with the muted trends in the region and synchronised global slowdown.

“Despite preliminary estimates showing growth to trough in the third quarter, we are likely to revise down full-year growth estimates when actual data is released this Friday, ” UOB said.

On the demand side, it expectednet exports to reflect a positive contribution to overall growth in the third quarter, offset by persistent inventory drawdowns.

Domestic demand will remain the key driver of growth but at a slower pace, as private consumption softens and investments remain lackluster amid lingering uncertainties and cautious business sentiment.

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