Update: Malaysia's economy grows 4.2% y-o-y in Q1, slowest in 6.5 years

[KUALA LUMPUR] Malaysia's economy expanded 4.2 per cent in January-March compared with a year earlier, its slowest growth for a quarter since 2009 as exports and domestic demand were weak.

A Reuters poll had forecast 4.1 per cent annual growth in the first quarter, and the pace in 2015's last three months was 4.5 per cent.

The central bank, which announced the latest growth rate on Friday, also said the current account surplus narrowed to 5 billion ringgit (S$1.7 billion) in the first three months of this year, lower than 11.4 billion ringgit in the previous quarter.

In January, the government revised its 2016 growth projection to 4.0-4.5 per cent from 4.0-5.0 per cent.

Muhammad Ibrahim, governor of Bank Negara Malaysia, said growth is projected to improve in second half "driven by higher production in manufacturing sector from added capacity, improved commodities production after El-Nino and higher minimum wages."

He also said "It's quite important for us not to forget that Malaysia is an open economy and global growth will have an impact on us. We are not immune."

Growth over the first quarter was largely supported by net exports, though expansion in outbound trade grew marginally by 0.2 per cent in March compared to 6.7 per cent a month earlier.

Malaysia's ringgit has seen some recovery after a difficult 2015, when it was hit by the collapse in global crude prices, slowing demand from top-trade partner China and a financial scandal tied to state-owned 1Malaysia Development Berhad (1MDB).

In the second quarter, the ringgit has been the worst performing Asian currency, shedding about 3.1 per cent against the dollar. But it remains the best performer this year, after strengthening 10 per cent in January-March.

REUTERS