The GDP expanded 4.9% y/y in 2Q2019 beating market expectations of 4.6% and fell within our expectations of 4.9%–5.0% was supported by domestic demand which grew by 4.6% y/y. In particular, growth was supported by private expenditure i.e. consumption and investment compensating public expenditure. Meanwhile, on the supply side, all sectors reported positive growth for the first time since 1Q2018.

With the 1H2019 GDP averaging at 4.7%, there is room for the full-year GDP to achieve BNM’s upside projection of 4.3%–4.8%. Chances for the economy to report a healthy GDP figure in the 3Q2019 remain, partly supported by the base factor. While our base case growth remains at 4.5%, our upside is still at 4.8%. Thus, we are maintaining our 2019 growth.

• 2Q2019 GDP expanded 4.9% y/y from 4.5% y/y in 1Q02019, beating market expectations of 4.6% and fell within our expectations of 4.9%–5.0%. It was supported by domestic demand which grew by 4.6% y/y compared with 4.4% in 1Q2019. In particular, growth was supported by private expenditure i.e. consumption and investment compensating public expenditure. But on a quarterly basis, the economy grew slightly slower by 1.0% q/q from 1.1% q/q in 1Q2019.

• Private consumption grew 7.8% y/y (+7.6% y/y in 1Q2019) while investment rose by 1.8% y/y (+0.4% y/y in 1Q2019). Sustained income growth and the festive spending supported household spending. Capital spending in the services and manufacturing sector boosted private investment. Net exports accelerated to 22.9% y/y in 2Q2019 from 10.9% y/y in 1Q2019.

• Meanwhile, on the supply side, all sectors reported positive growth for the first time since 1Q2018. Strong growth came from mining, up 2.9% y/y from -2.1% y/y in 1Q2019 from the recovery in natural gas output (9.4% y/y from -0.5% y/y), while crude oil production fell -4.2% y/y from -4.4% y/y in 1Q2019.

• Besides, manufacturing activities posted a decent growth of 4.3% y/y (+4.2% y/y in 1Q2019) coming from domestic activities which grew 5.5% y/y for the first two months in 2Q2019 (+3.5% y/y in 1Q2019). These compensated for slower export-oriented industries which rose by 3.7% y/y under the period review (+4.2% y/y in 1Q2019) due to weaker global demand, with negative spillover impact from the global semiconductor value chain. Meanwhile, services grew moderately by 6.1% (+6.4% y/y in 1Q2019).

• With 1H2019 GDP averaging at 4.7%, there is room for the full-year GDP to achieve BNM’s upside projection of 4.3%– 4.8%. Chances for the economy to report a healthy GDP figure in the 3Q2019 remain, partly supported by the base factor. While our base case growth remains at 4.5%, our upside is still at 4.8%. Thus, we are maintaining our 2019 growth.

Source: AmInvest Research - 19 Aug 2019