ALTHOUGH the economic growth figures for the first quarter of the year are within market expectations, the government needs to address low private investment expansion, said analysts. 

Malaysia’s first quarter growth of 4.5% is “commendable” in the face of global economic uncertainty, said analyst Michael Yeoh, who is the Kingsley Strategic Institute (KSI) president.

“The country’s private consumption growth is also commendable as there were concerns about private domestic demand. But the first quarter private consumption growth can also be attributable to Chinese New Year spending,” he said when contacted today. 

Bank Negara Malaysia (BNM) today released the growth figures for the first quarter of 2019, noting that on the supply side, major sectors continued to expand, with the exception of the mining sector due to the decline in oil and natural gas production arising from unplanned closure of production facilities.

The agriculture sector rebounded in rising to 5.6% in Q1 2019 from a contraction of 0.1% in Q4 2018, on account of strong recovery in oil palm yields which provided an additional lift to growth. On a quarter-on-quarter seasonally-adjusted basis, the central bank said the economy grew by 1.1%.

“Private demand will continue to underpin growth for the rest of the year,” said Yeoh. 

“Hence, it is important for the government to maintain strong investor confidence through policies which are consistent, clear and certain. We estimate the Malaysian economy to growth between 4% to 4.5% for the year.”

Socio-Economic Research Centre executive director and economist Lee Heng Guie said the economic growth is within market expectations. 

“What is of concern is private investment growth, which observers have said was quite weak in recent quarters, and was in fact in the negative in the fourth quarter last year,” Lee said.

“The government should look at how to re-energise private investment. Hopefully, the revival of the East Coast Rail Link project would give some support in the second half and over the medium term. 

BNM in its quarter bulletin said private investment growth slowed to 0.4% this quarter, with investment activity affected by heightened uncertainty surrounding global trade negotiations and prevailing weaknesses in the broad property segment. 

Nevertheless, spending on large multi-year projects provided some support to investment growth, particularly in the primary-related manufacturing and utilities services sub-sectors, the central bank said. 

Lee said he is cautious over the growth outlook for the next few quarters, with the external uncertainty surrounding US-China trade war. He added however that the economy remains supported by good domestic demand.

Domestic demand expanded by 4.4% in the first quarter, driven by firm household spending amid weaker capital expenditure, the central bank said. After three consecutive quarters of robust spending, private consumption growth moderated but remained strong at 7.6%, it said. 

“This mainly reflected the normalisation in spending following the frontloading of purchases during the tax holiday period. Nonetheless, household spending continued to be supported by income and employment growth,” BNM said. – May 16, 2019.