Domestic Demand Still Supporting Economic Growth in 1Q18

Malaysia’s real GDP growth slowed from 5.9% yoy in 4Q17 to 5.4% in 1Q18, slightly below market expectations of 5.6%, due partly to higher base effect in the corresponding period of last year. However, the 1Q18 GDP growth was supported partly by higher net exports, due to the sharp contraction in imports growth relative to exports growth. The decline in import growth reflected lower expenditure on public investment activity resulting in lower import of capital goods as well as slower import of intermediate goods due to cautious view of exports performance by manufacturers in 2H18. However, on a seasonally adjusted basis, GDP expanded by 1.4% qoq in 1Q18 (+1.0% qoq in 4Q17).

Domestic Demand Still Supporting Economic Growth in 1Q18

Growth in Malaysia’s domestic demand slowed from 6.2% yoy in 4Q17 to 4.1% in 1Q18, due to the sharp drop in investment activities for both public and private investment (which slowed sharply from 9.2% yoy in 4Q17 to 0.5% in 1Q18. The sharp slowdown in private investment was mostly seen in the services sector, particularly on education and healthcare sub-sectors. Gross fixed capital formation was relatively flat at 0.1% yoy in 1Q18 (4.3% in 4Q17).

Growth in private consumption slowed slightly from 7.0% yoy in 4Q17 to 6.9% in 1Q18, supported by continued strength in wage and employment growth, with positive spill over from strong trade growth last year, which supported income of exporters. Growth in private consumption and private investment both contributed to the economic growth by 3.7 percentage points and 0.1 percentage points respectively.

Source: Affin Hwang Research - 18 May 2018