Improved Exports Helps Malaysia’s Economy Gather Momentum in Q4
Malaysia’s economy grew at a much faster rate during the final quarter of last year. Its resilient exports were largely responsible for helping to promote growth despite the global slowdown from the US-China trade war.
The country’s central bank – Bank Negara Malaysia- is expecting the economy to hold steady in its growth, thanks to the growing demand for Malaysian exports. This demand for exports is expected to provide support for the country’s steady economic growth in 2019. The central bank is also expecting inflation rates to be higher than average this year due to benign cost pressures in 2018.
The solid growth in its gross domestic product was well received by Prime Minister Mahathir Mohamad’s administration. The administration had been facing growing discontent by the public over the rise in the cost of living since the administration took power.
Improved Exports Can’t Help Malaysia’s Economic in Long Term
However, the gains from these improved exports are unlikely to be sufficient to propel Malaysia’s sustained economic rebound. Slowing investments and private consumption during the October-December period of last year was a contributing factor to this. London-based economic research firm, Capital Economics, stated that consumption growth is likely to slow further as a result from the scrapping of the Goods and Services Tax.
Other factors are also likely to hamper economic growth. Fiscal policy for one, is set to weigh on domestic demand as the government works to reduce deficit. While private consumption continues to be a key driver of Malaysia’s economy, it grew at a much slower pace of 8.5% during Q4.
Malaysia’s trade surplus also experienced a rise of 6.9% annually during Q4. It’s current account surplus grew to RM10.8 billion during the October-December period. The ringgit also experienced a 1.5% rebound at the start of the year, having depreciated 1.8% on the dollar last year.