Malaysia’s economy expected to have grown by 5.2% YoY

Is the economy undergoing an easing path?

Although domestic growth will likely remain fairly resilient, some degreeof moderation can be expected.

According to a report by DBS, export growth has fallen to 0.5% YoY in 4Q14, down from 1.5% in the previous quarter. This jives with export trends across the region where weak global demand has resulted in lacklustre export performance. Moreover, the sharp decline in oil prices have further dented export sales and lifted the imports of petroleum products. This has led to downward pressure on the external trade balance.

Meanwhile, import growth has out-stripped export growth and expanded by 4.5% in the quarter, up from 2.7% previously. Essentially, this implies a sharp deterioration in net exports, which will take the wind out of the sail for overall GDP growth.

Separately, consumption growth is likely to have held up, albeit marginally slower. Cash handout and the GST offset package probably have helped to alleviate consumer sentiments although cuts in fuel subsidies may have shaved off some consumer purchasing power between Oct-Nov.

Here’s more from DBS:

Investment growth may improve slightly. But that comes on the back of a lower base. Beyond that, outlook for domestic investment remains dicey. Investors’ confidence has been affected by the plunge in oil prices and depreciation in the ringgit. Effects of fiscal consolidation were at work as well.

In short, while growth may have slowed from a robust expansion in the first half of the year, the economy has remained fairly resilient on account of its domestic growth. Full year GDP growth is expected to register 5.9%, up from 4.7% in 2013.