Malaysia grows five percent in third quarter, aided by export recovery

Malaysia's economy picked up pace in the third quarter, driven by resilient domestic demand and a recovery in exports while the current account surplus widened significantly after narrowing sharply in the first half of the year. Gross domestic product grew 5.0 percent from a year earlier, Malaysia's central bank said on Friday. This was the fastest pace since the last quarter of 2012, and above the 4.8 percent median projected for July-September in a Reuters poll.
"Domestic demand was the key driver of growth and growth benefited from the improvement in external demand," Central Bank Governor Zeti Akhtar Aziz told a news conference. Malaysia's economy, the third largest in Southeast Asia, grew 4.1 percent year-on-year in the first quarter of 2013 and 4.4 percent in the second.
The faster third-quarter pace suggests that the economy is likely to meet the 4.5-5.0 percent full-year growth estimate the central bank set in August. Earlier, its forecast was 5-6 percent. In 2012, the economy grew 5.6 percent. The fresh data spawned some optimism that Malaysia is on a better track than earlier this year. "We can see an upside surprise again given the pretty strong domestic demand outlook," said Rahul Bajoria, an economist at Barclays Capital in Singapore.
Irvin Seah, economist at DBS in Singapore, said improved external demand could provide firms with reason to invest more in the country. In the third quarter, domestic demand continued to underpin the economy. Private sector consumption grew 8.2 percent compared with 7.2 percent in the previous quarter while public consumption rose 7.8 percent, down from 11.8 percent.
Private investment rose 15.2 percent in the third quarter, compensating for a 1.3 percent drop in public investment. Zeti said the drop in public investment reflects "consolidation in the fiscal position of the government." Exports turned around, rising 1.7 percent in the third quarter after falling in the first half of the year, reflecting a pick-up in demand for Malaysian crude oil and electronics products. "Gradual recovery in the external sector will support growth," the central bank governor added.