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Malaysia Q3 GDP growth slips for 4th straight quarter to 4.4%

Pace of expansion has bottomed out, says central bank governor; some economists are doubtful about a rebound

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In its recent economic outlook report, Dr Mahathir's government forecast growth of 4.8 per cent in 2018 before inching up to 4.9 per cent next year.

Kuala Lumpur

MALAYSIA'S economy grew at its slowest pace in two years in the July-September quarter as the country grappled with weak external demand and what the central bank called "supply shocks" for liquefied natural gas (LNG) and palm oil.

The fourth straight quarter of slowing growth presents a challenge for the administration of Prime Minister Mahathir Mohamad, who in May ended six-decade-long single party rule in the country.

The central bank forecast a slight recovery in economic growth for next year, but some private economists said a rebound was unlikely, citing a combination of slowing external growth and domestic demand.

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Annual growth in July-September was 4.4 per cent, Bank Negara Malaysia (BNM) said. That was below the forecast of 4.6 per cent in a Reuters poll and April-June's pace of 4.5 per cent. "Growth has bottomed and on upside going forward," BNM governor Nur Shamsiah Mohd Yunus said.

Global trade tensions could drag the country's growth down by 0.3-0.5 per cent next year if it gets worse, she said.

She forecast the economy to expand 4.9 per cent next year, following 4.8 per cent for full-year 2018.

Capital Economics said the third-quarter numbers show growth was "still struggling for momentum" and that a sustained rebound was unlikely.

It expects growth of 4.5 per cent next year.

Euben Paracuelles of Nomura, citing a combination of slowing global economy, lower exports and private consumption, said that Malaysia's growth rate "is likely to get worse. It will be a more broad-based slowdown next year."

The central bank said growth in Q3 was supported by a 9 per cent increase in household spending and 6.9 per cent gain in private spending.

But the supply shocks from LNG and palm oil markets lowered growth for Southeast Asia's third-largest economy by 0.5-0.7 percentage point, the central bank said. The supply shocks have bottomed, it added.

For July-September the current account surplus narrowed to RM3.8 billion (S$1.2 billion).

Exports rose 6.7 per cent in September from a year earlier, rebounding from a 0.3 per cent annual drop the previous month, according to government data.

In Q3, Malaysia's trade surplus fell 4.1 per cent from a year earlier to RM25.2 billion. In April-June, the surplus was RM27.2 billion, a 12.9 per cent annual rise.

In its economic outlook report released two weeks ago, Dr Mahathir's government forecast economic growth of 4.8 per cent in 2018 - a sharp dip from last year's 5.9 per cent - before inching up to 4.9 per cent next year.

The government also abandoned a 2018 fiscal deficit target of 2.8 per cent set by the previous administration, raising it to 3.7 per cent, the highest since 2013. It expects moderation to 3.4 per cent in 2019 and 2.8 per cent in 2021.

The BNM governor said the central bank expects the ringgit to depreciate along with other regional currencies due to the strength in the US dollar.

Inflation was largely benign in Q3, but is expected to edge upwards the rest of the year and into 2019, the central bank said.

Annual inflation rose 0.3 per cent in September, a slight acceleration from a month earlier. The consumer price index rose 0.2 per cent in August, the lowest rate since February 2015. REUTERS