Moderate 4.7% Growth in Third Quarter

Services sector the main driver, expands 7.1%

KUALA LUMPUR: Malaysia’s economy posted a moderate growth of 4.7% in the third quarter (Q3) ended Sept 30 against 6.7% in the second quarter (Q2), supported by a 6.5% increase in domestic demand amid continued expansion in private and public consumption, Bank Negara said.

But the global economic crisis has cooled the country’s exports, with the net real export of goods and services declining 14.8%, compared with a growth of 20% in Q2, and weaker growth seen in the manufacturing sector.

Private consumption registered a growth of 8.1%, against 9% in Q2, due to bonus payments to civil servants, festive season spending and payment of fuel subsidy cash rebates, according to the central bank.

Public consumption increased by 6.9%, against 10.9% in Q2 on continued high expenditure for emoluments, and supplies and services.

O n a sectoral basis, the services sector continued to drive growth with an expansion of 7.1% (Q2: 8.2%), manufacturing saw weaker growth at 1.8% (Q2: 5.6%), agriculture grew at a moderate pace of 3% (Q2: 6%), construction moderated further to 1.2% (Q2: 3.9%) while mining contracted 0.3% (Q2: -0.5%).

Trade balance registered a record surplus of RM41.6bil (Q2: RM40.6bil), while exports grew moderately at 16.9% (Q2: 20.8%), supported by commodities and resource-based manufactured products. But capital imports were lower, reflecting the slower private investment activities in the economy.

Economists told StarBiz that the first half of next year would see the economy experiencing a marked slowdown consistent with the slump at the global level.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the Q3 growth was “decelerating slightly faster than expected” but was reflective of the global economy’s performance.

“The immediate impact is on the export-oriented industries, as can be seen from the manufacturing sector’s growth,” he said.

Yeah warned that Q4 figures “may be markedly lower although we’ll still be able to achieve overall growth of 5%,” adding that there was a need to prepare for a “slightly more severe” first-half of 2009.

CIMB Research chief economist Lee Heng Guie said the economy would likely see a slower growth of 2.5% to 2.7% in the first-half of next year.

“I’m still maintaining my 3% full-year growth for 2009,” he said.

Lee said full-year growth for this year would be 5.6%, revised from the 5.3% earlier as the Government had revised the first-half’s growth figures.

“We expect another 50 basis points cut in the overnight policy rate next year with the first 25-point cut to come in Q1 next year,” he said, referring to Bank Negara’s key interest rate which was cut by 25 basis points to 3.25% recently.

By Fintan Ng- The Star