IHS Global Insight : Malaysia’s Q1 GDP growth reflects resilient economic performance

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JAKARTA – IHS Global Insight Asia Pacific chief economist Rajiv Biswas provides report on latest Malaysia’s economic report and trend.  He said the Q1 GDP data highlighted the continued resilience of the Malaysian economy across most sectors, with construction and services strengthening, while the manufacturing sector continued to record strong growth.

Followings are the key points:

  • Malaysian Q1 GDP growth was up 4.2% year-on-year, supported by continued strong growth in services, construction and manufacturing.
  • Construction sector growth strengthened from 7.4% in Q4 2015 to 7.9% in Q1 2016, boosted by continued rapid growth in civil engineering, which was up 17.5% year-on-year.
  • The services sector continued to perform strongly, with growth improving from 5.0% in Q4 2015 to 5.1% in Q1 2016.
  • Growth in manufacturing also remained resilient, up 4.5% year-on-year in Q1, despite the impact of China’s economic slowdown on the rest of East Asia’s manufacturing sector.
  • The competitiveness of Malaysian manufacturing exports has been helped by the depreciation of the ringgit against the USD since late 2014, particularly since the US is a key market for Malaysian manufacturing exports.
  • The performance of electrical and electronics sector remained robust, with output growth of 5.7% year-on-year.
  • IHS Global Insight expects the Malaysian economy to remain resilient during 2016, with GDP growth forecast to be 4.2% in 2016, rising to 4.5% in 2017 and 5.2% in 2018.
  • Malaysia is ranked among the top ten investment hotspots in Asia by IHS Global Insight in its 2016 ranking of global investment hotspots.

Near-term Economic Outlook:

The Q1 GDP data highlighted the continued resilience of the Malaysian economy across most sectors, with construction and services strengthening, while the manufacturing sector continued to record strong growth. An important positive factor was the upturn in private consumption expenditure, showing that the consumer spending is stabilizing after slowing for several quarters following the GST implementation in April 2015. While the pace of investment growth slowed to just 0.1% year-on-year, the large pipeline of megaprojects, including the Petronas RAPID petrochemicals megaproject in Johor and major public infrastructure megaprojects such as the 29 billion ringgit Pan-Borneo Highway project in Sarawak and Sabah will continue to underpin infrastructure construction spending during 2016-2018.

IHS Global Insight projects that Malaysian GDP growth will strengthen from 4.2% in 2016 to 4.5% in 2017, rising further to 5.2% in 2018, helped by a gradual recovery in world oil prices, which are expected to rise from an average of USD44 in 2016 to USD52 in 2017, improving to USD60 in 2018. This will help to improve fiscal revenues as well as boosting the oil and gas sector.

Medium-term Economic Outlook:

The Malaysian economy is forecast by IHS Global Insight to achieve a per capita GDP of USD 20,000 by 2025, with total GDP exceeding $1 trillion by 2030. Malaysian GDP growth is forecast to average 5.0% per year over the next decade from 2016-2025. The structure of the Malaysian economy will continue to shift towards higher value-added manufacturing and services. Strategic growth industries in the services sector will include financial services, healthcare, education, commercial aviation, tourism and the IT-BPO industry, as Malaysia becomes an increasingly important services-exporting economy for Southeast Asia.

One of the key macroeconomic strengths of the Malaysian economy is its highly diversified export sector, with a wide range of commodities, manufacturing and services exports. This will help to accelerate the economic transformation of Malaysia to an advanced economy as well as attracting FDI inflows from multinationals. (*)

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Source: The Insiderstories
IHS Global Insight : Malaysia’s Q1 GDP growth reflects resilient economic performance

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