Above expectations – Malaysia’s GDP in 1Q17 stood at RM280.1b, increase enormously by +5.6% y-o-y (from +4.5% y-o-y in 4Q16). This reading was significantly above our expectation of +4.7% and market consensus of +4.8%. The higher-than-expected result was aided by surpassing performance of manufacturing and agriculture sectors. Besides that, on a seasonally adjusted quarterly basis, the GDP grew at 1.8%.
Positive growth shown by main sectors – The services sector posted an on-going growth of +5.8% (v.s 4Q16: +5.5%) led by expansion in its sub-sectors which are wholesale & retail trade, expanding by +6.3%.
Manufacturing sector continued its uptrend by growing +5.6% in 1Q17 (v.s 4Q16: +4.8%). Meanwhile, Electrical & Electronic (E&E) products remained as the main driver after expanding +7.9% in 1Q17, aided by production of printed circuit boards and semiconductors. Besides, the Construction sector posted another impressive growth of +6.5% driven by Civil Engineering that posted a growth of +12.1%, supported by oil & gas-related and infrastructure projects. On the other hand, Agriculture sector rebounded from a negative trajectory after showing a growth of +8.3% y-o-y (v.s 4Q16: -2.4%). The reversal of Agriculture sector was impelled by Oil Palm (+17.7%) and Rubber (+23.5%).
However, the mining and quarrying sector showed a dismal growth of +1.6% (v.s 4Q16: +4.9%) due to lower production of crude oil and natural gas.
Soaring domestic demand – The bigger expansion of private consumption has supported domestic demand for 1Q17 after increasing by +6.6% y-o-y (v.s 4Q16: +6.1%). Consumer spending posted a better growth underpinned by Food & Non-Alcoholic Beverages, Communication and Housing, Water, and Electricity, Gas & Other Fuels. Besides, public sector consumption rebounded from negative, showing a growth of +7.5% compared to -4.2% in 4Q16. The turnaround was supported by higher spending on supplies and services in this quarter. Meanwhile, Gross Fixed Capital Formation (Investment) shot at +10.0% y-o-y from +2.4% in 4Q16. The greater momentum was lifted by the spike in Machinery & Equipment, +21.8% and lesser extent by Structure and Other Asset with +3.8% and +1.4% respectively.
Bright growth in external demand – Exports and imports posted massive growths of +9.8% (vs 4Q16: +1.3%) and +12.9% (vs 4Q16: +0.7%) respectively. The better performance was mainly due robust export growth of the nation’s main products to the major trading partners as well as widened expansion of imports in its main components.
Another uptrend expected in 2017 – We foresee that manufacturing and agriculture sectors under the supply side as well as domestic demand under the demand side continue to be underpinned by stronger global demand to nation’s main products, recovery of weather from El-Nino phenomenon and strengthening in RM. Hence, we are revising upward our full year forecast of 2017 to +4.7% from +4.5% amid betterthan-expected GDP growth in this quarter. However, we foresee the stronger growth will only last till the first half of the year, followed by softer growth in the second half 2017. External factors still pose a downside risk to the nation’s GDP growth on the backdrop of fragile global economic growth and lingering uncertainty on US President Donald Trump’s pro-growth policies.
Source: JF Apex Securities Research - 22 May 2017
Created by kltrader | Aug 28, 2023