Malaysia’s economy grew by a surprising 6.2 per cent in the first quarter of the year, the central bank announced Wednesday, but economists warned that its surging exports could be hit by a slowdown in China.
Southeast Asia’s third largest economy saw positive growth in the quarter in all its major economic sectors except for mining, and strong expansion in domestic demand for foreign goods, Bank Negara said.
Inflation rose to 3.4 per cent in the first quarter against 3.0 per cent in the same period last year, Bank Negara said, after cuts in fuel, sugar and other subsidies.
Trade grew healthily between January and March, with strong exports pushing the trade surplus up by 14.9 per cent and domestic demand rising 7.4 per cent year-on-year.
“Exports will continue to benefit from the recovery in the advanced economies while private domestic demand is expected to remain the key driver of the overall growth,” the bank said.
But economists warned that a continuing global recovery hung in the balance as China’s growth continues to cool.
“Going forward, despite continued improvement in the US and Europe, we are still reliant on the performance of China and looking at reforms in Japan,” said Kenanga Investment’s Wan Suhaimie Wan Mohd Saidie.
China has become Malaysia’s top export market in recent years, particularly for palm oil, transport equipment and electronics components.
Exports to China were worth 97 billion ringgit ($30 billion) in 2013, although outgoing trade to the Asian giant slid in March for the first time since June 2013.
The government has forecast economic growth of between 5 and 5.5 per cent this year, while the central bank has a wider range of 4.5 to 5.5 per cent.
The government is also planning to introduce a goods and services tax next year as it seeks to tackle its budget deficit.
A May 1 rally saw thousands of Malaysians take to the streets to protest against the new tax, saying the cost of living is already too high.
Malaysia has one of Asia’s highest debt-to-GDP ratios. Critics say the government is mismanaging the economy and has failed in its pledge to fight endemic corruption.
Source : Channel News Asia | May 16, 2014