Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2013/5/16/business/13118061&sec=business
Published: May 16, 2013
Headwind: Zeti, at the briefing with Bank Negara officials, says the high imports in the first quarter were due to one-off increases in aircraft purchase
Gross domestic product (GDP) grew 4.1% in the quarter compared with the same period a year ago, lower than the 5.5% median expectations of economists. The fourth-quarter GDP was revised upwards to 6.5% from 6.4% previously.
“In the first quarter, the Malaysian economy was significantly affected by the weakness in this external demand,” Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz told a media briefing yesterday.
She said higher imports, at 3.6%, contributed to the 0.6% decline in exports.
“High imports were due to one-off increases in aircraft, which brought down the figure of the overall growth,” Zeti said.
However, growth continued to be supported by strong domestic demand, which rose 8.2% year-on-year compared with 7.8% in the previous quarter.
Alliance Research chief economist Manokaran Mottain said the first quarter's economic performance was affected by seasonal volatility and weakness.
“I'm waiting for April and May data before making any assumptions, and maintaining a full-year growth of 5.5%, as despite the external weakness, the economy is still domestic-driven, and I believe growth would accelerate in the second half when the implementation of Economic Transformation Programme-related projects steps up,” he told StarBiz.
The central bank has maintained a GDP growth of 5% to 6% for the year.
United Overseas Bank Ltd economist Ho Woei Chen expects growth to continue to be domestic-driven in the coming quarters, given the lacklustre external recovery.
“With the elections out of the way and no major surprises, fixed investments could yet pick up in the coming months. However, the weakness in external demand could remain a headwind and the Malaysian economy could see its full-year growth coming in well below 5%, compared with our earlier forecast of 5.5% after a sluggish first quarter,” she wrote in a note.
Private consumption recorded a strong growth of 7.5%, driven by sustained income growth and favourable labour market conditions, whereas public consumption moderated to 0.1% amid lower government spending on supplies and services.
Total investments came in at 13.2%, with private-sector investments up 10.9% due to continued capital spending in the domestic-oriented manufacturing and consumer-related services sub-sectors as well as the ongoing implementation of oil and gas (O&G) projects.
Public-sector investments rose 17.3%, supported by higher capital spending by public enterprises in the O&G, utilities and telecommunications sectors.
The slower pace of growth also came on the heels of March's factory output data as measured by the industrial production index. The index dropped 0.2% year-on-year due to declines in its manufacturing and mining components. Manufactured exports, representing two-thirds of total exports, fell by 3.5% in the same month.
Zeti said inflation ticked up to 1.5% in the quarter under review, compared with the 1.3% of the previous quarter due to price increases in the food and
non-alcoholic beverages category of the consumer price index.
“At this point in time, we are monitoring both growth and inflation closely. We see that the current inflation rate is supportive of growth. The external risk is most likely to affect growyh at the downside, as we have not seen a sustainable recovery from the major economies,” she said, adding that rising costs were not due to demand pressures.
Zeti said the Government had some space to cut subsidies gradually, although there would be some impact in the form of rising costs coming from the increase in the prices of the food, transportation and energy categories.
However, she believes the economy can adjust accordingly if and when the Government starts to cut subsidies.
Zeti said whatever pledges the Government had made prior to the general election would have to be within the budget.
“It is important to rationalise the budget deficit because the Government has also made a commitment to do so over the next few years and to manage its level of indebtedness,” she elaborated.
The Government has a target to narrow the fiscal deficit to 4% of GDP this year and to 3% by 2015, while there is a debt-to-GDP ceiling of 55%.
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