1Q2018 GDP grew slightly below our expectation of 5.5% and the market’s projection of 5.6%. It grew 5.4% y/y from 5.9% y/y in 4Q2017, supported by private consumption that rose 6.9% y/y (7.0% y/y in 4Q2017) and exports by 3.7% y/y (6.7% y/y in 4Q2017). On the supply side, we noticed strong growth coming from the services sector.

Apart from private consumption and services, we noticed that most of the other economic segments showed some loss of growth momentum. Still, our current 5.5% GDP growth for the full year remains, as we expect the private consumption and services sectors will continue to support growth together with other areas of business activities.

With the announcement of the GST removal, added with the potential reintroduction of fuel and electricity subsidies as well as the review of toll roads, these suggest that the underlying inflation will pick up gradually. While our base case for OPR remains with a total of one rate hike by BNM that took place in January with the OPR now at 3.25%, the probability for a second rate hike in September 2018 remains at a low 45%.

• 1Q2018 GDP grew slightly below our expectation of 5.5% and the market’s projection of 5.6%. It grew 5.4% y/y from 5.9% y/y in 4Q2017, supported by private consumption that rose 6.9% y/y (7.0% y/y in 4Q2017) and exports by 3.7% y/y (6.7% y/y in 4Q2017).

• On the supply side, we noticed a strong showing from the services segment that grew 6.5% y/y (6.2% y/y in 4Q2017) while manufacturing grew by 5.3% y/y (5.4% y/y in 4Q2017). Meanwhile, agriculture, construction and mining expanded 2.8% y/y, 4.9% y/y and 0.1 y/y respectively from 10.7% y/y, 5.9% y/, and -0.3% y/y in 4Q2017.

• Apart from private consumption and services, we noticed that most of the other economic segments showed some loss of growth momentum. Still, our current 5.5% GDP growth for the full year remains, as we expect the private consumption and services sectors will continue to support growth together with other areas of business activities.

• With the announcement of the GST removal, added with the potential reintroduction of fuel and electricity subsidies as well as the review of toll roads, these suggest that the underlying inflation will pick up gradually. While our base case for OPR remains with a total of one rate hike by BNM that took place in January with the OPR now at 3.25%, the probability for a second rate hike in September 2018 remains at a low 45%.

Source: AmInvest Research - 18 May 2018