Here's why Malaysia 1Q13 GDP growth figures disappointed everyone

It hit 4.1% YoY.

According to DBS, first quarter GDP growth figures out yesterday surprised on the downside. The headline number printed 4.1% YoY against a consensus forecast of 5.5%.

In fact, almost everyone in the market was looking at growth pace above the 5% mark.

Here's more from DBS:

An easing off in government spending and investment growth to 0.1% and 13.2% respectively, down from 1.2% and 16% in the previous quarter, have partly contributed to the moderation in growth.

This is despite the improvement in private consumer to 7.5%, from 6.2% previously. However, the main drag came from the external front. Though export growth improved with a decline of 0.6%, up from the sharper drop of 1.6%, it was the surge in import growth that caused the damage.

Import growth expanded by 3.6% as compared to the decline of 0.6% in 4Q12.

Although the headline number did surprise on the downside, the point to note is that underlying growth fundamentals in Malaysia remain firm.

The average growth pace for the last two quarters is still at a healthy pace of 5.25%. That’s about the medium term potential growth rate of the economy.

Moreover, consumption growth remains strong, underpinned by a buoyant labour market. Investment and government spending are expected to ease after the election anyway.

In fact, the easing of domestic growth is necessary on account of potential inflation risk as well as to maintain fiscal sustainability.

Furthermore, the surge in import is reflecting a strong domestic consumption demand as well as possible restocking by manufacturers.

With the above in mind, we are maintaining our full year GDP growth forecast of 5.5%, which is currently smacked in the middle of the official forecast range of 5-6%.