Malaysia's growth pace slid for the fifth straight quarter in April-June, and avoiding a further decline could depend on domestic demand staying resilient at a time that global demand for the country's commodities remains weak. The trade-dependent Southeast Asian economy had annual growth of 4.0 percent in the second quarter, the central bank said on Friday. That matched a Reuters poll forecast, marked a slip from January-March's 4.2 percent and was the slowest pace in nearly seven years.
Malaysia's problems include the slowdown in top trade partner China and poor prices for its energy and other commodity exports. Prime Minister Najib Razak faces graft allegations related to 1Malaysia Development Berhad. He has denied any wrongdoing. Bank Negara Malaysia Governor Muhammad Ibrahim indicated confidence that the economic growth rate won't slide further. "To date our economy remains resilient driven by domestic demand and is on track to grow within the projected 4.0-4.5 percent (for 2016) amid a challenging global environment," he told a press conference.
Some economists are not so sanguine. ANZ said "any faltering in domestic demand could be the dynamic that triggers significant growth deterioration" and also possibly another 25 basis point rate cut by the central bank. In July, BNM cut its benchmark rate for the first time in three years, to 3.0 percent. UOB economist Julia Goh agreed that one more rate cut this year is possible.
"It looks like a slow second half," she said. "If there's anything that will help prop up the economy, it's going to be domestic demand and probably more stimulus measures, that we expect will be announced in the 2017 Budget." Second quarter growth was propped up by annual 6.3 percent expansion in domestic demand, up from 5.3 percent in January-March. Private investment grew 5.6 percent from a year earlier, against 2.2 percent the previous quarter.
In the first half of 2016, exports grew only 0.2 percent from a year earlier, in ringgit terms. The current account surplus narrowed to 1.9 billion ringgit ($472 million)in the second quarter, from 5 billion ringgit in the first quarter, due to a smaller trade surplus and higher net income payments, the central bank said.