Malaysia’s economy grew at the slowest pace in a decade in the fourth quarter, largely due to the supply disruptions, official data revealed Wednesday.
Gross domestic product grew 3.6 percent year-on-year in the fourth quarter, slower than the 4.4 percent expansion seen in the third quarter, data from Bank Negara Malaysia showed. This was the weakest growth since 2009 and well below the forecast of 4.2 percent.
Quarter-on-quarter, GDP advanced 0.6 percent, following the third quarter’s 0.9 percent expansion.
In 2019, the economy expanded 4.3 percent compared to 4.7 percent in 2018. The full year growth was also the slowest since the global financial crisis in 2009.
The country’s central bank cautioned that growth in the first quarter of 2020 will be affected by the China coronavirus outbreak. The impact will be much felt in tourism-related sectors, and also in manufacturing through supply chain disruptions and the expected slowdown in China.
Nonetheless, Malaysia’s economy will remain supported by private sector activity in 2020, the bank said.
Bank Negara Malaysia Governor Nor Shamsiah Mohd Yunus said the central bank has enough room to ease policy further. “We have ample room, inflation is still low,” she said. The bank had reduced its rate unexpectedly in January.
Judging from the extent of the slowdown ahead, the central bank is likely to cut the rate twice, by 25 basis points each at its March and May meetings, Prakash Sakpal, an ING economist, noted.
This would take the interest rate down to 2.25 percent, just shy of the 2 percent low reached during the global financial crisis a decade ago, he noted.
Reflecting the lapse in the impact of the SST implementation, headline inflation slowed to 1 percent in the fourth quarter from 1.3 percent in the third quarter.
The production-side breakdown of GDP showed that the service sector continued as the main impetus to the economic growth, which grew 6.1 percent in the fourth quarter after rising 5.9 percent a quarter ago.
Meanwhile, growth in the manufacturing sector moderated to 3.0 percent from 3.6 percent in the previous quarter.
The recovery in the construction sector, which grew marginally by 1.0 percent, had also supported the growth in the fourth quarter. The mining and quarrying sector fell at a slower pace of 2.5 percent and farm output was down 5.7 percent.
On the expenditure side, private final consumption expenditure surged 8.1 percent in the fourth quarter and government spending grew 1.3 percent.
Furthermore, gross fixed capital formation posted a smaller decrease of 0.7 percent. Exports and imports decreased 3.1 percent and 2.3 percent, respectively.
Due to larger deficit in services account, the current account surplus fell to MYR 7.6 billion from MYR 11.5 billion in the previous quarter. In 2019, the current account surplus hit MYR 49.7 billion, the highest level since 2012.
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