Malaysia's domestic growth feared to drop in the coming quarters

Growth expectation also down to 5%.

According to DBS, they have lowered growth expectation for 2013 to 5.0%, down from 5.5% previously. First quarter GDP growth has surprised on the downside. 

The headline number printed 4.1% YoY against a consensus forecast of 5.5%. In sequential basis, that translates into a contraction of 2.3% QoQ saar.

Here's more from DBS:

This is down sharply from a robust expansion of 8.1% in the previous quarter. An easing off in government spending and investment growth have partly contributed to the moderation in growth (see chart).

On the contrary, private consumption has picked up. However, the main drag came from the external front. Though export growth has improved, it was the surge in import growth that caused the damage.

That is, the recent disappointment in the GDP growth is mainly attributed to the surge in imports and consequently a sharp drop in net exports, rather than weakness in domestic growth. The surge in import has in fact, reflects a strong domestic consumption demand as well as possible restocking by manufacturers.

That said, the pace of domestic growth is expected to ease in the coming quarters with investment sentiment likely to turn cautious and the Federal government probably wants to ease off on its pump-priming effort to prevent a build-up in inflationary pressure as well as to ensure longer term fiscal sustainability.

Likewise, this will have a knock-on effect on employment outlook and consequently on private consumption.

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