Posted on 28 May 2009
The economy’s contraction of 6.2% in the first quarter is worse than expected, with the central bank warning of more of the same in the second quarter, although a turnaround in the economy is seen in the second half of the year.
A poll conducted by StarBiz in late April saw economists expecting at least a 3.5% contraction in the first quarter.
The worse-than-expected numbers were in line with countries in the region where
“Q2 will be similar to Q1,” Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said, adding that the external outlook was still uncertain and exports remained weak.
But she noted that fiscal measures that were being implemented, coupled with access to financing, higher commodity prices and stabilising external factors would help boost the economy in the second half of the year.
Economists said the first quarter contraction might be the trough as forward indicators and employment figures had shown some signs of stabilisation.
“In my opinion, the Q1 performance will likely be the lowest in terms of gross domestic product (GDP) contractions because there are early signs of sequential improvement in exports and industrial output,” said CIMB Investment Bank Bhd economic research head Lee Heng Guie, who had expected a contraction of 5% to 5.5% in the first quarter.
Lee said
He is maintaining his forecast of a 3.0% contraction in the economy for the year.
Lee expects the economy to contract 4.5% in Q2, and 2.5% in Q3 and see a growth of 1.3% in Q4.
He said figures from the Federation of Malaysian Manufacturers showed that sales orders were stabilising while retrenchments had also slowed down.
“There were 2,800 retrenched in April compared to 3,400 per month from the second half of last year to the end of the first quarter,” Lee added.
He agreed with the central bank’s views that the external headwinds had impacted the economy at full-force.
Lee said fiscal spending and external demand would help stabilise export-related segments of the manufacturing sector as well as industrial output.
Maybank Investment Bank Bhd chief economist Suhaimi Ilias said the economic performance in Q1 would add to the sense of urgency for the Government to more aggressively implement fiscal measures to stimulate the economy.
“The speed of implementation in Q2 has also not been impressive,” he said, adding the house had expected a contraction of 4.3% in the first quarter.
Suhaimi said the current quarter’s performance would not be significantly different and the Government was likely to make a large revision to its forecast for the year.
