A Quick Note

• Despite unfavourable global developments, Malaysia’s headline GDP growth pace in the first quarter of 2019 came in at a respectable 4.5% year-on-year. Private consumption, as expected, provided crucial support. It expanded by 7.6%, albeit slower than the previous quarter’s 8.4%. Private investment, however, remained muted, growing by a mere 0.4%. Investments have been affected by deteriorating global sentiment and weakness in the broad domestic property segment. Meanwhile, weaker external demand took its toll on exports growth of goods and services, which came in nearly flat (+0.1%). 

• Going forward, domestic demand will have to continue providing the critical support needed to drive headline GDP growth if BNM’s growth target range of 4.3%-4.8% is to be achieved. We believe private consumption will remain relatively strong in the near term on the back of a stable labour market. Our base forecast for private consumption growth remains at 6.4% for 2019. 

• On the external front, the global environment is becoming less supportive. Trade statistics from Netherlands-based CPB show that global trade volume contracted in the first two months of 2019. Growth in trade volume in recent months has been the weakest since the global financial crisis (GFC) in 2009. Similarly, statistics from the Semiconductor Industry Association also show that global sales of semiconductors fell by 13% year-on-year in March, its second consecutive month of double-digit contraction on a year-on-year basis. The back-to-back double-digit contraction was the first since the GFC.