Malaysia's economic growth moderates to 4.4% in Q3

Stock drawdown has decreased 1.4% in the GDP growth.

The GDP growth of Malaysia has slowed to 4.4% YoY in Q3 as compared to the 4.5% growth last quarter.

According to an analysis by UOB, the slowdown is driven by the public investment declining by 5.5% YoY for the fourth consecutive quarter amidst lower capital spending by public corporations and the improvements in general government capital spending. Stock drawdown had also cut off 1.4%pts in the country’s headline GDP figures.

“Malaysia’s modest growth is in line with a trend of slowing growth in the region. EM growth has been waning since March this year, affected by rising global interest rates, trade tensions, and idiosyncratic stress events in Argentina and Turkey,” Juliah Goh, senior economist at UOB said in a note.

(Also read: Malaysian industrial production growth slowed to 2.4% in Q3)

Strong domestic demand, which contributed 6.4% to Q3 GDP growth, offset softening trade figures brought about by deepening tensions between the US and China.

Private consumption growth also hit a 6-year high of 9.0% in Q3 because of the two-month tax holiday in July-August. Private investment also grew to 6.9%.

In a sector breakdown, the services sector booked the largest growth at 7.2% followed by manufacturing and construction segments which rose by 5% and 4.6% respectively.

GDP growth in Q4 is expected to increase as production constraints and supply shocks dissipate across the manufacturing, agriculture and mining sectors. Civil servant bonus of US$238.6m (MYR1b) in December, year-end spending, positive employment, and wage growth will also boost its growth despite the disappearing effects of the tax holiday.

Goh expects Malaysia’s economic growth to hit 4.8% by end-2018 and 2019.