Malaysia on course for healthy 2Q GDP growth, says Lim

Finance Minister Lim Guan Eng says the government's fiscal consolidation is on track as it targets to reduce the deficit from 3.7% of GDP in 2018 to below 3% by 2021.

KUALA LUMPUR: The country's gross domestic product is on course for healthy second-quarter growth as indicated by April's better-than expected trade performance, says Finance Minister Lim Guan Eng.

In a statement issued today, Lim said Malaysia's 4.4% year-on-year (y-o-y) increase in imports to RM74.3bil in April, which beat Bloomberg's survey of market expectations, reflects growing domestic demand.

"The April increase in imports suggests an increase in domestic demand, and it came after the first quarter Malaysian GDP expanded by 4.5% from a year ago, again besting Bloomberg market consensus of 4.3%," he said.

Looking at the product breakdown, both imports of consumption and intermediate goods expanded in April, which hints at robust second-quarter growth , he added.

"This positive trade development happened amid a steady inflation rate of 0.2% year-on-year in April, low unemployment rate of 3.4% in March, and along with expected continuous expansion in industrial production this quarter." 

Nielsen’s Consumer Confidence Index for the first quarter of 2019 also showed Malaysian consumers were confident of their economic prospects in the next 12 months, as the index surged 11 points to 115 points from 104 points a year ago.

Meanwhile, the 1.1% growth in April exports to RM85.2bil, which also beat Bloomberg's survey estimates, will keep the country's annual current account balance in surplus.  

"The export growth, despite the persisting trade war between two of the world’s largest economies, highlights Malaysia’s competitiveness at the global stage," said Lim.

"This will shield the country from excessive volatility caused by external events like the disruptive, ongoing trade war," he added.

Lim highlighted a recent Nomura research report that ranked Malaysia as the fourth biggest beneficiary of trade diversion from the ongoing trade war. 

He cited the 48% growth in approved FDI in 2018 to RM80.5bil from RM54.4bil in 2017 as a result of the trade diversion.

"Nevertheless, Malaysia hopes that the trade war will end because eventually there will be no winners, only losers. 

"All parties should instead enhance cooperation at the regional and global levels to allow the global economy to grow sustainably," he said.