Four-per-cent growth would not sound too bad in western capitals. Source: Wikimedia
Malaysian growth slid for a fifth straight quarter in June and avoiding a further decline could depend on domestic demand while the market for its commodities remains weak.
The export-dependent federation had annual growth of 4 per cent in the second quarter, Kuala Lumpur’s central bank said, the slowest pace in nearly seven years.
The Chinese slowdown in its main trading partner and the low fuel prices for its energy exports account for its relatively meagre growth, which still dwarfs anything being seen in Europe.
Bank Negara Malaysia (BNM) governor Muhammad Ibrahim remained upbeat. “To date, our economy remains resilient, driven by domestic demand and is on track to grow within the projected 4-4.5 per cent amid a challenging global environment,” he told the media.
ANZ, however, said “any faltering in domestic demand could be the dynamic that triggers significant growth deterioration” and also possibly another BNM 25-basis-point rate cut.
BNM in July cut its benchmark rate for the first time since 2013, to 3 per cent.
UOB economist Julia Goh agreed that one more rate cut this year was a possibility. “It looks like a slow second half,” Goh said. “If there’s anything that will help prop up the economy, it’s going to be domestic demand and probably more stimulus measures, that we expect will be announced in the 2017 budget.”
Second-quarter growth was made possible by a 6.3-per-cent expansion in domestic demand, up from 5.3 per cent in the first quarter. Private investment increased 5.6 per cent year on year, against 2.2 per cent the preceding quarter.
Weiwen Ng, an ANZ analyst, said the current-account balance and ringgit “will continue to be held hostage by oil prices”.
The ringgit has strengthened about 7 per cent so far during 2016, but depreciated by 2.5 per cent in the second quarter and is again weaker than 4 to the US dollar.
Muhammad insisted that the central bank’s investigation into irregularities at state investment fund 1Malaysia Development Berhad (1MBD) was complete and would not be reopened, despite the civil suits filed by the US Justice Department.
Last month the US authorities sought to seize more than US$1 billion in assets, apparently for funds misappropriated from 1MDB.
US investigators, including the FBI, said that at least US$3.5 billion was stolen from Malaysian taxpayers through opaque transactions and shell companies between 2009 and 2014.
“We have completed all our investigations on 1MDB,” said the banking chief. “We have imposed a penalty and have taken all necessary action entrusted under the law. We have closed the investigation.”
