Malaysia to be Asia's third-fastest growing economy this year

Its growth is on a winning streak.

Malaysia’s economy is on a roll, and it has been noted that the country’s blow-out H1 GDP performance carries with it sufficient momentum for it to grow at a clip of 5.7% for the whole of 2014.

According to a research note from OCBC Bank, at that rate, Malaysia will actually rank as the third-fastest growing economy in Asia after China and the Philippines this year.

While Bank Negara will not be updating its 2014 GDP estimate until after the government’s budget announcement in October, it had acknowledged that growth will likely exceed its earlier projections of 4.5-5.5%.

Here’s more from OCBC Bank:

The bullishness on growth prospects is indeed a theme that featured prominently during our meeting with BNM officials this week.

To begin with, even though exports may appear to be softer in the second half due to base effect, it will remain a sector that contributes strongly to growth.

Interestingly, it was pointed out that the key electronics sector has received a jolt of dynamism of late.

Rather than the staid PC segment that Malaysia has been normally associated with, the manufacturing sector is increasingly geared to the semiconductor and sensors production network servicing the Internet of Things revolution, that is reshaping the global tech landscape.

 Meanwhile, the pick-up in private sector investment that is evident especially from the Q2 GDP data – whereby it grew by 12.1% yoy – was highlighted as well.

Rather than being powered by investment in just the capital region, this cycle is said to be helped by a broader-based uplift.

Oil and gas projects in eastern Malaysia and industrial projects in the northern economic corridors were cited as examples of the geographical spread, for instance.

Apart from that, while private consumption may soften in the coming quarters, it does not seem to cause too much of a concern, given that it is deemed to be merely meandering down towards its long run average after years of growing above trend.

Moreover, similar to the stance it has been taking in recent policy statements, the central bank highlighted that stable employment outlook and income continue to underpin household spending.

All in all, Bank Negara’s growth outlook remains constructive enough to suggest that there is enough comfort zone for further rate hike.