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[KUALA LUMPUR] Malaysia's economic growth eased last quarter on weaker exports, a slowdown that could deepen after the start of a new consumption tax in April.
Gross domestic product rose 5.6 per cent in the three months through March from a year earlier, after climbing a revised 5.7 per cent in the final quarter of 2014, the central bank said in Kuala Lumpur Friday. The median in a Bloomberg News survey of 24 economists was for a 5.5 per cent increase.
Malaysia's central bank has refrained from joining global counterparts in easing monetary policy, saying interest rates are delivering support for growth while guarding against inflation risks. Economic expansion may lose steam as an uneven global recovery hurts export demand and prompts consumers and companies to hold back spending.
"We see growth continue to slow down a bit moving into the second quarter," Edward Lee, regional head of research at Standard Chartered Plc in Singapore, said before the announcement. "After the initial pre-GST consumption spurt, we will possibly get a bit of slowdown as well in private consumption. We see the export sector remaining very weak."
The ringgit was Asia's worst performer last quarter as a drop in crude prices hurt government finances and dented investor confidence. It has since swung to become the region's second-best amid a rebound in oil. The currency rose 0.4 per cent as of 11:45 am in Kuala Lumpur, according to data compiled by Bloomberg.
The Malaysian economy is forecast to grow 4.5 per cent to 5.5 per cent this year, down from an earlier projection of as much as 6 per cent. The government trimmed expectations as it cut expenditure amid lower expected revenue from oil.
The central bank left its key rate unchanged for a fifth straight meeting this month, saying prospects are for the economy to remain on a steady growth path.
Governor Zeti Akhtar Aziz signaled last month she sees no need for a rate cut in the near future, barring the threat of a "fundamental" downturn.
Prime Minister Najib Razak's efforts to broaden the tax base through a 6 per cent goods and services has pushed up prices at supermarkets, restaurants and retailers. While the experience in other countries showed a moderation in consumer spending in the first year of such a tax, lower oil prices may be a buffer to an expected easing in consumption, Ms Zeti said in April.
Exports fell 0.6 per cent in the first quarter from a year earlier, after increasing 1.9 per cent in the previous three months. Manufacturing growth quickened to 5.6 per cent, while private investment rose 11.7 per cent.
Private consumption expenditure climbed 8.8 per cent last quarter from a year ago, accelerating from 7.6 per cent in the previous period. Household consumption was "high" on food and beverages, transport and communication, the statistics department said in a statement Friday.
Malaysia's current-account surplus widened to 10 billion ringgit in the first quarter from a revised 5.7 billion ringgit surplus in the preceding three months. That compared with the median estimate of 6.1 billion ringgit in a Bloomberg survey of five analysts.
Even as an oil rally has helped make Malaysian bonds among Asia's best performers over the past three months, it hasn't allayed Fitch Ratings' concerns over the nation's deteriorating finances ahead of a second-quarter review.
Malaysia's fundamental picture remains clouded in part by the build up of "contingent liabilities" for the government related to state investment company 1Malaysia Development Bhd, Andrew Colquhoun, Fitch's head of Asia Pacific sovereign ratings, said in an interview May 7.