Malaysia's Q4 GDP growth pace seen cooling to 5.7% y-o-y: poll

[KUALA LUMPUR] Malaysia's economy grew more slowly in the last quarter of 2017 than the blistering pace set in July-September, a Reuters poll showed, as exports increased at a slower rate.

The median forecast in the poll of 12 economists was for annual growth of 5.7 per cent in October-December, compared with the previous period's 6.2 per cent - the fastest rate since the second quarter of 2014.

Forecasts for the fourth quarter ranged from 5.2 per cent to 6.1 per cent.

"The best is behind us," ING said in a note on Monday about Malaysia's growth pace, noting that a high base effect has been impacting growth rates in several Asian economies.

Whatever Malaysia's fourth quarter number, 2017 will have brought Malaysia its fastest full-year growth since 2014's 6 per cent. Growth in each of 2017's first three quarters topped 5.5 per cent.

Brian Tan, a Singapore-based economist with Nomura, said the fourth quarter brought a "slowdown in exports which looked quite sharp, but we suspect it was due to the ringgit appreciation during the period".

In October-December, exports rose 12.4 per cent from a year earlier, down from increases of more than 20 per cent in each of the first three quarters. The peak increase, in July-September, was 22.1 per cent.

Malaysia reports its trade figures in ringgit. During 2017, the currency strengthened more than 10 per cent against the US dollar.

Industrial production rose 2.9 per cent annually in December, down from 5 per cent a month earlier.

DOMESTIC DRIVER

Growth in South-east Asia's third-largest economy beat expectations in the third quarter, helped by private sector spending.

In October, the government revised up its 2017 full-year growth projection to 5.2-5.7 per cent, up from 4.3 per cent to 4.8 per cent.

Malaysia's economy grew 4.2 per cent in 2016.

Robust private consumption is expected to have propped up fourth quarter growth, with higher motor vehicle and retail sales and strong consumer sentiment, HSBC said in a note.

The volume index of wholesale and retail trade rose 6.8 per cent in the fourth quarter, according to data released last week by Malaysia's statistics department.

Strong growth figures over the past three quarters and rising inflation rates prompted Bank Negara Malaysia in January to raise its key interest rate by 25 basis points to 3.25 per cent. It was the first hike in three and a half years.

ING, which forecasts 5.5 per cent annual growth for 2017's fourth quarter, has pencilled in one more 25 basis point rate hike, for the third quarter of this year.

REUTERS