Malaysia's economy expected to pick up in second half

PETALING JAYA: Despite the disappointing gross domestic product
(GDP) year-on-year figures in the first quarter of 2013, Malaysia's
economic growth is expected to improve in the second half of 2013.
Analysts
said the economy would pick up more in the second half on better export
data, continuous strong domestic demand, improved sentiment and
confidence in the economy post the general election and a more stable
recovery in advanced economies.
However, several research houses
have downgraded their full-year GDP forecasts to reflect the
slower-than-expected first quarter growth of 4.1%, the lowest quarterly
growth since the third quarter of 2009.
“We found the poor
growth of below 5% to be the first in seven quarters, dragged by weak
exports down by 0.6% year-on-year in the first quarter of 2013
following a decline of 1.6% year-on-year in the fourth quarter of
2012,” said MIDF Investment Bank Bhd chief economist Anthony Dass in a research note.
He,
however, said domestic demand remained strong, expanding by 8.2%
year-on-year in the first quarter of 2013 from 7.8% year-on-year in the
fourth quarter of 2012.
Dass has lowered his full-year real GDP
growth to a range of 4.8% and 5% from between 5.5% and 5.8% previously,
due to the poor performance in the first quarter of 2013.
However, he projects the economic growth to be stronger in 2014 at 6.4%, boosted by domestic demand and improving exports.
“We
expect the economic growth performance to most likely stay below 5% in
the second quarter of 2013, primarily dragged by weak exports,” he said.
CIMB Investment Bank Bhd
economic research head Lee Heng Guie also cut his full-year real GDP
estimate to 5.1% from 5.5% previously and expects GDP to grow 5% in the
second quarter, aided by election spending and partly due to the run-up
in equity prices after Barisan Nasional's win.
“With the removal
of the political overhang, we believe that broad policy continuity and
certainty as well as the faster implementation of ETP (Economic Transformation Programme) projects, including the mass rapid transit project, will sustain the investment momentum,” he said.
Lee added that domestic demand should continue to anchor the economy's growth, especially via private sector expenditure.
“We
earlier expected an even chance of rate normalisation if domestic
economic conditions stay strong in the second half of 2013. But now
that growth is not expected to pick up as strongly as anticipated, we
expect interest rates to be kept on hold at 3% for the rest of the
year,” he said.
He had earlier anticipated interest rates to be between 3% and 3.25% previously.
Maybank Investment Bank Bhd and Alliance Research have, however, maintained their full-year GDP growth estimates.
Maybank
is maintaining its full-year GDP growth forecast of 5.3% as it expects
investment growth momentum to accelerate post-election, and consumer
spending to remain resilient as the subsidy rationalisation programme
was not expected to resume in the second half of the year. “We also
expect improvements in manufacturing and mining as the year
progresses,” it said.
Alliance foresees growth rebounding to an
average of 6.4% in the second half of 2013, from an anticipated average
of 4.5% in the first half of the year, brought about by continuity of
strong domestic activities.
“In this regard, we maintain our
house view that the full-year GDP growth would likely hit 5.5% in 2013,
still within the range forecast of 5% and 6% set by the central bank in
March 2013,” it said.