Posted on 14 Aug 2015
Bank Negara Malaysia (BNM) governor Tan Sri Dr Zeti Akhtar Aziz said in her quarterly GDP review that growth was supported by domestic demand.
"The private sector remained the key driver of growth during the quarter. Private consumption expanded at a more moderate rate of 6.4% (1Q15: 8.8%) as households adjust to the implementation of the GST," she told reporters at a briefing on Malaysia's 2Q15 economic and financial developments yesterday.
Zeti admitted that the central bank itself was surprised that private consumption held up.
Private investment, however, grew 3.9% during the quarter compared with 11.7% in 1Q15, due to a decline in spending on machinery and equipment, especially in the transportation segment, and slower investment in dwelling services.
Growth in public investment turned negative in the second quarter, falling 8% compared with a 0.5% growth in 1Q15.
Zeti said this was mainly due to the near completion of a few projects by public enterprises, which more than offset the positive growth of capital expenditure by the Federal Government.
Public consumption grew 6.8% compared with 4.1% in 1Q15 following the stronger expansion in supplies and services expenditure amid sustained growth in emoluments.
Zeti said the current account balance narrowed during the quarter, but remained positive at RM7.6 billion. The current account balance decreased by RM2.4 billion from previous quarter, mainly reflected by lower surplus of RM23.3 billion in goods account and higher deficit of RM4.6 billion in services account.
She said the higher external debt in 2Q15 was partly due to valuation effects, but that impact is contained. Total external debt rose to RM794.3 billion in 2Q15 from RM768.1 billion in 1Q15.
Of the RM419.9 billion offshore borrowings, 45.6% are accounted by banks due to their regional operations.
Headline inflation rose 2.2% in 2Q15 mainly due to the implementation of GST. Zeti said this was within expectations and core inflation remained stable.
She said the monetary policy stance remains accommodative and supportive of economic activity and overnight policy rate has been maintained at 3.25% amid steady growth prospects and contained underlying inflation.
Zeti said financing remained supportive of economic activity, with relatively stable total loans growth of 9.1% amid continued strong growth of 17.2% in SME loans. The total gross financing raised by the private sector through the banking system and the capital market amounted to RM290.1 billion.
Meanwhile, growth in household debt moderated further to 8.3% with slower growth in outstanding credit card balances and financing for purchase of securities while housing loans continued to grow at 11.9% annually.
"The Malaysian economy is expected to remain on a steady growth path with domestic demand remaining as the key driver of growth. Private consumption is expected to continue to adjust to the introduction of the GST, although wage growth and stable labour market conditions would provide support to household spending," said Zeti.
She said capital spending in the manufacturing and services sectors and infrastructure projects will support investment activity.
"These developments will contribute towards offsetting the weaker performance of the external sector," she added.
