Malaysia 3Q GDP Growth Likely Slowed to 5.7% -- Poll

By Yantoultra Ngui Features Dow Jones Newswires

KUALA LUMPUR, Malaysia--Malaysia's economic expansion likely slowed slightly in the third quarter after two quarters of better-than-expected growth.

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Malaysia's gross domestic product in the July-September period likely grew 5.7% from a year ago, the median forecast from a Wall Street Journal poll of 10 economists.

The forecasts ranged from 5.1% to 6.2%, according to the poll. Official data from Malaysia's central bank is due on Friday at noon.

Forecasting 6.2% growth in the third quarter, Dr. Mohd Afzanizam Abdul Rashid, chief economist at Kuala Lumpur-based Bank Islam Malaysia, noted that the external sector was strong and domestic spending, especially on consumer expenditure, was stable.

At the other end of the forecasts, HSBC Global Research predicted 5.1%, growth and said there was on-going weakness in Malaysia's manufacturing sector as implied by the continued deterioration of the country's manufacturing purchasing managers' index.

Moreover, high household debt along with higher inflation stemming from higher oil prices likely dampened private consumption growth, it said.

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"On the external front, both exports and imports growth have remained robust, but higher growth in imports likely resulted in an overall subtraction of growth from headline GDP," HSBC said.

In the second quarter, Malaysia's GDP grew at a faster-than-expected 5.8%, its biggest expansion in over two years. That was powered by growth in the private and public sectors, and a broad-based expansion in exports of manufactured goods and commodities. GDP grew at a faster-than-expected rate of 5.6% in the first quarter.

The strong economic expansion in the first half prompted the Malaysian government in October to raise its growth forecast for the year to 5.2%-5.7% from between 4.3% and 4.8%.

But recent data--from slower-than-expected export growth in September to weaker manufacturing activity in October--suggest that growth might lose momentum toward the year-end. The Malaysian government projected decelerating exports growth should nudge down overall economic growth to 5.0%-5.5% in 2018.

Nevertheless, Malaysia's central bank appeared to signal the possibility of a rate increase next year in its latest policy statement released earlier this month. It maintained its overnight policy rate at 3.00%.

Bank Negara Malaysia said it didn't rule out the possibility of its monetary-policy committee reviewing the current degree of monetary accommodation, given the strength of global and domestic macroeconomic conditions.

"At this rate, the economy is perhaps operating above its potential level," Dr. Mohd Afzanizam of Bank Islam said. "Therefore, the question on the timing of the OPR hike should gain momentum going forward."

-- Write to Yantoultra Ngui at yantoultra.ngui@wsj.com

(END) Dow Jones Newswires

November 15, 2017 02:15 ET (07:15 GMT)