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Malaysia’s solid exports, demand likely spurred faster Q1 growth
KUALA LUMPUR: Malaysia is expected to report on Friday that its pace of economic growth picked up in the first quarter, thanks to surging exports and resilient domestic demand.
A strengthening economy is pivotal for Prime Minister Datuk Seri Najib Razak, who is widely expected to call early polls this year amid concerns that rising living costs could cut support for his long-ruling coalition.
The median forecast in a Reuters poll of 12 economists was for 4.8% annual growth in January-March, up from 4.5% the previous quarter.
If the pace is 4.8%, January-March will be the best period since the second quarter of 2015.
Exports from Southeast Asia’s third-largest economy rose strongly in early 2017, aided by China’s push to rebuild inventory and higher commodity prices, Standard Chartered said in a May 12 research note.
Malaysian industrial production “was resilient in Q1, with the manufacturing sector growing 5.6% year-on-year versus 5% in Q4, on the back of robust demand for electronics,” the bank said.
March exports surged 24.1% from a year earlier, slowing just slightly from the 26.5% pace set the previous month and almost double the 13.6% expansion in January.
Malaysian growth will also likely continue to get a boost from domestic demand, plus increased government revenue from higher global oil prices, Moody’s Investors Service said last week.
“Private consumption remained robust thanks to the sustained low interest rate environment and the flow-on from upbeat global demand,” Moody’s said.
Stronger ringgit
The ringgit currency has strengthened about 3.7% against the dollar this year, after a protracted slump partly caused by poor global demand for Malaysian oil and commodities.
Capital outflows hit a record in November-January, when foreign investors divested their holdings of government bonds to the tune of RM27.9bil (US$6.46bil).
Analysts attributed the capital flight to the Malaysian central bank’s decision to clamp down on offshore trade of the ringgit – a move that Bank Negara Malaysia insists has helped stabilise the currency.
Pressure on the ringgit “should be balanced for now”, as Malaysia has sustained its current account surplus and reduced its portfolio outflow risks, said Vaninder Singh, Asia economist for NatWest Markets.
“Our read of the portfolio inflows data suggest that most real money funds have already turned underweight implying whatever money was looking to exit, already has,” he wrote in a note. – Reuters
Source: http://www.thestar.com.my/business/business-news/2017/05/18/malaysias-solid-exports-demand-likely-spurred-faster-q1-growth/#t0ZbEHOL2OIdCxGL.99