Malaysia Economic Growth Slows In Q1

Malaysia's economic growth eased sharply in the first quarter as measures taken to contain the spread of the coronavirus, or Covid-19, pandemic weighed on exports and domestic growth, data from Bank Negara Malaysia showed Wednesday.

Gross domestic product grew 0.7 percent on a yearly basis, much slower than the 3.6 percent rise in the fourth quarter of 2019 but confounding expectations for a decline of 1.5 percent.

On a quarter-on-quarter basis, the economy shrank 2.0 percent in the first quarter after rising 0.6 percent in the preceding period.

The expenditure-side breakdown showed that household spending growth eased to 6.7 percent, while government spending growth improved to 5 percent. Gross fixed capital formation fell 4.6 percent.

Exports and imports were down 7.1 percent and 2.5 percent, respectively.

The economy is forecast to contract in the second quarter but to gradually improve in the second half of 2020 driven by fiscal and monetary measures. A positive recovery is expected in 2021, in line with global growth, the bank said.

Alex Holmes, an economist at Capital Economics, said GDP figures were slightly better than expected but will provide little comfort, with the economy set to contract much more sharply this quarter as depressed domestic demand and an extremely weak external environment weigh on activity.

The economy is set to see more pain ahead as broader control measures to contain coronavirus will remain in place until June 9, Prakash Sakpal, an ING economist said. This means a virtually entire quarter of significantly sub-normal economic activity.

In the first quarter, headline inflation remained at a moderate 0.9 percent. Average headline inflation in 2020 is likely to turn negative, due mainly to projections of substantially lower global oil prices, the bank said.

Another report from the central bank showed that the current account surplus increased to MYR 9.5 billion from MYR 7.5 billion in the fourth quarter, driven by surplus in goods trade and the smaller deficit in primary income.