Malaysia’s economy contracts–Bad News

May 13, 2016

Malaysia’s economy contracts–Bad News

Malaysia’s economy grew at a slower pace of 4.2% in the first quarter of 2016, due to slower growth in the manufacturing and services sectors, but the overall growth was still above economists’ forecast of a subdued 4% growth.

The Statistics Department said on Friday the growth of 4.2% was slower when compared with the 5.7% growth a year ago. It was also slower than the 4.5% expansion in the fourth quarter ended Decembe 31, 2015.

“On a quarter-on-quarter seasonally adjusted, the GDP for first quarter of 2016 grew 1.0%,” it said. In the Q1, 2016, all sectors on the production side posted a positive growth except for agriculture. The continuous expansion in the dervices, manufacturing and construction has led the growth and remained as the main catalyst.

2016 is going to be a difficult year–Get Real

In a separate statement, Bank Negara Malaysia (BNM) said the services sector grew 5.1% in Q1, 2016 from 6.4% a year ago, manufacturing expanded 4.5% from 5.6% a year ago also. As for mining, it shrunk to grow at 0.3% only from 9&.Construction expanded at a slower pace of 7.9% from 9.6% while agriculture’s contribution was -3.8% from -4.1% a year ago. The Statistics Department said on the expenditure side, the economy was spearheaded by private final consumption expenditure and government final consumption expenditure.

“The expansion in both consumptions has offset the sluggish performance in external demand,” the department said. Malaysia’s value of GDP in current terms for Q1, 2016 amounted to RM291bil.

Q1 2016 GDP versus Q4 2015

The services sector expanded at 5.1% (Q4, 2015: 5.0%) supported by the wholesale & retail trade (5.2%) and information & communication (8.5%).

The manufacturing sector grew 4.5% (Q4, 2015: 5.0%) supported by the electrical, electronic & optical products (5.7%), mainly in semiconductors, computers and peripheral equipment.

The department said this sector performance’s was further supported by petroleum, chemical, rubber & plastic products that grew 2.7% (Q4, 2015: 1.4%) following a turnaround in refined petroleum products and expansion in chemical and plastic products.

Construction sector rose at a faster rate of 7.9% (Q4, 2015: 7.4%). Civil Engineering sustained its double-digit momentum bgrowth of 17.5% though slower from the preceeding quarter (Q4 2015: 20.4%) and continued to support the construction sector.

In terms of expenditure, the department said private final consumption expenditure rose to 5.3% (Q4, 2015: 4.9%) underpinned by consumption of food & beverages, housing & utilities, communication and transportation.

But gross fixed capital formation (GFCF) eased to 0.1% (Q4 2015: 2.7%) due to the deceleration in machinery & equipment (-7.1%) as well as other asset (-3.3%). While the public sector (share: 30.1%) contracted 4.5% which has influenced towards the moderation of GFCF in this quarter, the private sector posted a growth of 2.2% (Q4 2015: 4.9%).


6 thoughts on “Malaysia’s economy contracts–Bad News

  1. Mr Chang pulls no (verbal) punches :

    Thanks, Dr. Phua. I have used it for all readers of this blog. The UMNO scumbags and liars deserve this no holds barred hammering from my friend and fellow Malaysian journeyman, Matthias Chang.–Din Merican

  2. What plan does Najib as Finance Minister have in place to deal with unemployment when the economy shrinks further in the coming months? Counter cyclical measures will be difficult to put in place, given the weak fiscal position of the government and our national debt. And I wonder what our Transformation Blues CEO of Permandu and Dato Seri Wahid Omar in the PM’s Department who is in charge of the EPU can do apart from the usual comment that “our economy is fundamentally sound”. Any ideas? –Din Merican

  3. If the growth outlook worsens further, expect rate cuts by Bank Negara and weaker ringgit. There is little room for fiscal stimulus. So monetary policy support will be needed.

    The government will have to print more paper money to provide liquidity and that will impact negatively on the external value of the ringgit. The specter of inflation too is ever present. It is a Finance Minister’s nightmare.–Din Merican

  4. Matthais was very blunt indeed. Maybe, this time they won’t take action against him for sedition because some of those UMNO fellas that he mentioned in his talk … well, dia orang tak faham Bahasa Inggeris ….

  5. What plan does Najib have? What else? Spend and print money and get more audacious.. You can hear him say all the more reason to stick to his “successful” “transformation” plan, move on from 1MDB, etc. etc. IF oil.price recover enough before the next GE, he will say see it’s working and again ” percayalah” nonsense.

  6. For the first time it seems that “bad news” for the Malaysian economy is actually good news for the country. How else to get rid of Najib otherwise?

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