News Room - Business/Economics

Posted on 29 Nov 2007

Malaysia GDP grows 6.7% in Q3

Malaysia's economy expanded by 6.7% in the third quarter, the fastest pace in three years, underpinned by rising domestic spending on goods and services.

The gross domestic product growth rate for the three months to Sept 30 was also substantially higher than most economists' forecasts and better than the revised 5.8% expansion in the second quarter.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz told reporters yesterday that the overall 6% growth target for the year was achievable as the “growth momentum is expected to be maintained.”

On her outlook for next year, Zeti reiterated the central bank’s forecast for 6% growth, but said Bank Negara would continue to review the situation, given the lack of clarity in some developed economies.

She also noted that while a slowdown in the United States would have a negative impact on the global economy, there would be a “partial decoupling” of several emerging economies, especially in Asia where growth is driven mainly by domestic demand.

“The overall potential remains for the domestic economy to stay on a steady growth path,” she said.

Bank Negara also kept its inflation forecast at below 2.5% for the whole year.

The headline inflation, as measured by the annual change in consumer price index, rose slightly to 1.9% in October. Inflation averaged 1.8% in the third quarter.

The Government had this year launched campaigns to attract tourists, increased spending on infrastructure and raised salaries for the civil servants to boost the local economy and counter the impact of declining exports.

Domestic demand grew 12.6% in the third quarter, on the strength of private sector activities. The increased public spending continued to provide support, Bank Negara said.

Consumer consumption during the quarter rose 14% against 13.1% in the second quarter on stable job market conditions and strong commodity prices.

Public consumption rose 5.3% compared with 10.2% growth in the second quarter.

The service sector continued to be the key growth driver. The sector expanded 10.5% in the third quarter from 9.4% in the preceding period on strong domestic demand, tourism and business activities.

“All other key sectors recorded positive growth in the third quarter,” Bank Negara said.

The manufacturing sector saw a pick up of 3.4% in the third quarter from 1.5% in the second, reflecting the gradual recovery in the electronics and electrical industry and further expansion of domestic-oriented industries.

Production in export-oriented industries expanded 1.4%, a turnaround from a decline of 1.6% in the second quarter, amid rising demand from China and Europe.

Computers and parts output, which is geared towards the United States, showed a marked improvement and posted 0.2% growth after a 16.6% contraction in the second quarter.

However, exports continued to decline for a second straight quarter, falling 2.1%.

Domestic-oriented industries, however, continued to expand, up 4.6% for the quarter, mainly on sustained demand for construction materials and the upturn in the sales of new motor vehicles.

Construction activities grew 4.7% in the third quarter, on implementation of various infrastructure projects under the Ninth Malaysia Plan, while the agricultural sector improved 0.6% on higher crude palm oil output.