Malaysia GDP beats estimates, private sector held up

Bloomberg

Malaysia’s economic expansion beat estimates as private consumption growth quickened, helping counter weak government spending.
Malaysia’s consumers and companies are now the growth pillars of the economy after a collapse in global crude prices hurt exports and curtailed the government’s ability to spend. Donald Trump’s victory in the U.S. presidential election poses a risk to Asian economies should he follow through with imposing trade barriers.
Prime Minister Najib Razak has allocated more funds for the poor and promised civil servants a bonus to support domestic consumption. The central bank delivered a surprise 25 basis-point cut in the benchmark overnight policy rate in July and lowered the amount of cash that banks must set aside as reserves earlier this year.
“Weak export sales could likely be the main drag,” Irvin Seah, a senior economist at DBS Group Holdings Ltd. in Singapore, wrote in a Nov. 10 report. “Amid the challenging external environment, domestic demand will likely remain the key driver of growth.” Malaysia’s central bank has space for two more rate cuts until the end of 2017, Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore, said before the announcement. He forecast a rate cut when policy makers meet later this month, adding that potential fluctuations in the ringgit would be among reasons affecting the decision.
The central bank said on Friday that while growth is “currently relatively subdued,” it’s projected to pick up as policy measures gain traction and global prospects improve.
The central bank also said that ringgit volatility will persist mainly due to external uncertainties including oil, China’s economic outlook and Brexit.Governor Muhammad Ibrahim said the ringgit will continue to be market-determined and the central bank’s role is to continue to manage extreme volatilities in the ringgit with no targeted level or predetermined path.
Private consumption expenditure climbed 6.4 percent last quarter from a year ago, compared with 6.3 percent in the previous three months. Overall public sector spending rose 0.3 percent in the period, easing from 6.9 percent previously. Exports fell 1.3 percent in the third quarter from a year earlier.