Malaysia’s economy expands 5.9% on private-sector spending

Malaysia’s economy grew at a slightly faster pace than economists projected last quarter, boosted by a global trade recovery and rising private consumption.

Gross domestic product rose 5.9 percent from a year earlier, after climbing 6.2 percent in the third quarter, Bank Negara Malaysia said in a statement on Wednesday in Kuala Lumpur.

The median estimate of 18 economists surveyed by Bloomberg was for growth of 5.8 percent. The economy expanded 5.9 percent in 2017, the fastest pace in three years.

Malaysia’s growth recovery strengthens Prime Minister Najib Razak’s position as he seeks to retain his power in a general election this year. The economy has benefited from rising demand for its manufactured goods and commodities, lifting last year’s export growth to the fastest in 12 years.

Consumer spending has been buoyed by a stable labor market and Najib’s cash handouts to low-income earners, while the government-led infrastructure projects added jobs. The central bank on Wednesday said growth this year will remain favorable and domestic demand will remain the key driver.

“Growth in 2018 will moderate slightly, but it will still be a good and solid year,” said  Edward Lee, chief economist for Southeast Asia at Standard Chartered Plc. in Singapore. “The ongoing infrastructure projects will support investment and external demand will remain healthy, but a bit slower than last year.”

The government is forecasting growth of as much as 5.5 percent this year, and an inflation rate of 2.5 percent to 3.5 percent. The central bank raised interest rates for the first time since 2014 in January, as policy-makers seek to prevent risks that could arise from rates being too low for too long.

“The risk that Bank Negara Malaysia tightens again this year has eased a bit. Investment growth in fourth quarter was soft. Plus, there are substantial headwinds for investment in 2018,” Tamara Henderson of Bloomberg Economics said.

“The expected faster expansion in global growth would continue to benefit Malaysia’s exports, with positive spillovers to the domestic economic activity,” the central bank said. “Headline inflation is expected to moderate in 2018, reflecting a smaller contribution from global cost factors and a stronger ringgit compared to 2017.”

Investors are bullish with the ringgit appreciating more than 2 percent against the US dollar this year, among the best performers in Asia, after making its first annual gain last year since 2012.

The currency rose 0.4 percent to 3.9255 as of 12:31 p.m. in Kuala Lumpur, maintaining gains from earlier, while stocks were little changed.

Private-sector consumption rose 7 percent in the fourth quarter from a year earlier, while investment climbed 9.2 percent. Public sector expenditure growth eased to 3.4 percent. Exports increased 7.1 percent, while imports rose 7.4 percent.

Service industries grew 6.1 percent while manufacturing rose 5.7 percent.

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