Saturday, 24 May 2014
Looking beyond top line GDP growth
Malaysia’s Gross Domestic Product (GDP) grew an impressive 6.2% in the first quarter of this year, one of the highest first quarter (1Q) growth in the region. On a quarter-on-quarter basis, though, 1Q2014 growth is slower at 0.8%, compared to 4Q2013’s 1.9%.
The unexpected surge in 1Q GDP sparked off a slew of revisions in growth forecast for 2014, with projections averaging around 5.5%, compared to 5% before.
Is this strong growth sustainable?
In releasing the 1Q performance data, Bank Negara Malaysia guided that GDP performance in 1Q is “exceptional” and unlikely to be repeated in the subsequent three quarters.
Indeed, while the top line numbers are looking good, there are still pockets of weaknesses in the economy, which if not addressed in the coming months, will undermine the growth prospects of the country over the longer term.
Will domestic demand and export performance which are the main growth drivers of the 1Q GDP growth be sustainable moving forward?
Some economists are concerned of the prospect especially amidst a period of rising inflation, high household debt and the impending interest rate rise by Bank Negara Malaysia which is likely to happen in July.
With rising government spending and a budget deficit to tackle, the slack in public consumption is likely to be filled by private sector investments. BUT can private investments deliver the figures?
Read the full analysis in The Edge this week.