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Malaysia Growth Slows, Inflation Accelerates
Malaysia's economic growth continued to slow for the fourth straight quarter, while inflation accelerated.
The country's central bank today announced measures to liberalize overseas investment, inter-company loans and foreign currency trade financing facilities obtained by residents. The measures are aimed at raising business efficiency and competitiveness of the economy, the bank said.
The real GDP grew 4.6 percent year-on-year in the first quarter, after rising 4.8 percent in the previous three months, Bank Negara Malaysia said. Economists had forecast GDP growth of 4.9 percent. Growth has been slowing from the double-digit figure of 10.1 percent in the first quarter of 2010.
Services output increased 5.9 percent, slower than the previous quarter's 6.1 percent. Manufacturing grew 5.4 percent following the 6.2 percent gain in the previous quarter.
Expenditure analysis showed that private consumption increased 6.7 percent after rising 6.4 percent in the previous three months. Public spending rose 6.1 percent following a modest 0.1 percent gain in the previous quarter.
Gross fixed capital formation increased 6.5 percent, much weaker than the 10 percent growth in the previous quarter. Exports rose 3.7 percent, following the 1.7 percent gain in the fourth quarter.
“Going forward, growth is expected to be sustained,” Bank Negara Malaysia said. “Growth in private consumption will continue to be firm, given the favorable employment conditions and income growth, while private investment is expected to strengthen further amid an improving outlook for the domestic economy and the further expansion of new growth industries.”
In the first quarter, inflation rose to 2.8 percent annually from 2 percent in the previous three months, the central bank said. Elsewhere, data from the Department of Statistics showed that inflation quickened in April, led by higher food and transport costs. The consumer price index, or CPI, rose 3.2 percent annually following a 3 percent increase in the previous month. Economists were looking for an inflation figure of 3.1 percent.
On May 5, Malaysia's central bank lifted its key interest rate by a quarter point for the first time this year to 3 percent and demanded that banks set aside more funds as reserves to absorb excess liquidity. It was the fourth hike since last March.
The central bank expects global commodity and energy prices to remain at elevated levels this year. The bank also sees some signs of domestic demand factors adding upward pressure on prices in the second half of 2011.
Food remains the main inflation driver, but administered price controls prevent translation of high global oil prices into domestic fuel prices, ING Bank economists said in a note ahead of the release of the data.
Administered price controls and sub-potential growth are expected to prevent inflation from becoming a big problem for monetary policy. ING Bank expects the May interest rate hike be the last in the current cycle.
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