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Malaysia growth quickens in pick-up that may already be waning
[KUALA LUMPUR] Amid a sliding currency and a flirtation with default by its state investment company, Malaysia got some good news Thursday: its economy unexpectedly accelerated last quarter.
The bad news: the pickup probably won't last.
Gross domestic product rose 5.8 per cent in the three months through December from a year earlier, after climbing 5.6 per cent in the third quarter, the central bank said in Kuala Lumpur today. That beat all estimates in a Bloomberg News survey of 22 economists where the median was for a 5 per cent increase. The economy grew 6 per cent in 2014.
Private consumption and investment have supported expansion in the Southeast Asian nation, even as the commodity producer's exports slow. Crude prices at half the level of a year ago are curbing revenue and forcing the government to cut spending, with Prime Minister Najib Razak saying in January growth may be weaker than initially estimated in 2015.
"Despite today's upside surprise, we remain cautious on the 2015 outlook, and a slowdown in economic activity remains our base case," said Lim Su Sian, an economist at HSBC Holdings Plc in Singapore. "The slump in oil prices is also likely to have a more pronounced impact on exports going forward." Ringgit Falls The currency has fallen about 3.5 per cent against the US dollar this year, one of the two worst performers among major Asian currencies tracked by Bloomberg. The ringgit slid to 3.6375 on Jan 29, the weakest level since April 2009, data compiled by Bloomberg show. It extended declines today.
The economy is projected to expand 4.5 per cent to 5.5 per cent this year, Najib said Jan 20, compared with an earlier forecast of as much as 6 per cent growth. The central bank left its benchmark interest rate unchanged for a third straight meeting in January.
"The Malaysian economy is expected to remain on a steady growth path," the central bank said today. "The gradual recovery in global growth will lend support to manufactured export performance, although overall export growth would likely remain modest amid lower commodity prices." Inflation this year will be between 2.5 per cent and 3.5 per cent, central bank Governor Zeti Akhtar Aziz said last month. The government in October projected consumer price gains would average 4 per cent to 5 per cent this year.
While a new consumption tax of 6 per cent is set to start in April, price pressures may be limited as the government yesterday announced lower electricity tariffs from March for businesses and some consumers.
State-owned investment company 1Malaysia Development Bhd hadn't been able to repay a 2 billion ringgit (US$552 million) loan owed to Malayan Banking Bhd. and four other lenders since November, the Edge newspaper reported Jan 6. It was given a third 30-day extension last month and the debt will come due at the end of February, people familiar with the matter said Jan 27.