GDP seen at 4-4.5% in Q4

PETALING JAYA: After a slower growth of 4.4% in the third quarter of 2019 (3Q19), economists have forecast that the Malaysian economy expanded in the range of 4% to 4.5% in last year’s final quarter.

At such a growth rate, Malaysia could likely miss the government’s target for 2019 and witness a slower pace of economic expansion for a second consecutive year.

Based on the country’s Industrial Production Index (IPI) performance, which grew by an average of 1.2% in the first two months of 4Q19, AmBank Research expects the fourth quarter’s gross domestic product (GDP) growth to be around 4.5%.

“This should translate the full year GDP growth at 4.5%.

“For 2020, the GDP is expected to grow around 4.6% supported by private consumption, gross fixed capital formation from the mild expansionary Budget 2020 and complemented by exports, ” it said in a note.

In November 2019, the IPI rose by 2% year-on-year and surpassed market expectations of 1%. It also exceeded the 0.3% growth seen in October, which was the lowest in more than six years.

TA Securities Research expects the IPI to continue expanding at a better pace in December 2019, led by the steady growth in manufacturing and pick-up in commodity prices. “Our estimate showed that the manufacturing sector should increase by 4.% y-o-y in 4Q19 (3Q19: 3.6%). Hence, we are maintaining our view that GDP growth to remain moderate in 4Q19 at 4.5%.

“Our full-year GDP for 2019 stands at 4.6%.

“For 2020, we project real GDP to be modest at 4.5% y-o-y, in line with moderate global economic expansion and trade, ” it said in a note yesterday.

A more conservative Maybank IB Research forecasts a lower growth in 4Q19 in the range of 4% to 4.4%. It pointed out that industrial production growth in the October-November 2019 period slowed down to 1.1% y-o-y, compared to 1.6% y-o-y in 3Q19. This reflected slower manufacturing and electricity output, on top of further decline in mining output due to lower production of crude oil and natural gas.

Retail trade performance also moderated in the October-November 2019 period.

Meanwhile, gross exports and imports declined further in the two-month period by 6.2% y-o-y each respectively.

As a result, Maybank IB Research expects the final quarter of last year to record slower growth, bringing the full-year economic growth to 4.5%.

The government has previously guided for the Malaysian economy to grow by 4.7% in 2019, similar to the growth in 2018.

Bank Negara, on the other hand, forecasts a growth rate in the range of 4.3% to 4.8%.