Malaysian economic growth moderates in Q4 2019

Malaysian GDP growth slowed in Q4 2019 to a pace of 3.6% year on year (y/y), compared to 4.4% y/y growth in Q3 2019. While private consumption spending remained buoyant, helping to underpin growth, the main drag on growth was from continued contraction in public investment, which fell 7.7% y/y.

From an industry sector perspective, service sector industries continued to show strong expansion, boosted by the strength of consumer spending. However, manufacturing growth moderated to a pace of 3.0% y/y, due to continued softness in global orders for the electrical and electronics industry. Agricultural output contracted sharply in Q4 2019, down 5.7% y/y, mainly due to lower oil palm output, which was impacted by the extremely dry weather conditions. Mining output also showed a small contraction, due to temporary disruption to oil and gas output as a result of closure of some facilities for maintenance work.

The overall pace of GDP growth in 2019 remained resilient, growing 4.3% y/y, albeit a moderation from the 4.7% pace in 2018. The decline in public investment spending and continued softness in electronics exports weighed on the overall pace of growth in 2019. The outlook for 2020 has become subject to greater downside risks due to the economic shock from the coronavirus epidemic in China, which has impacted on Chinese tourist visits to other Asian countries.

The economic shockwaves from the novel coronavirus epidemic in China has also increased the downside risks to Malaysia's GDP growth outlook in 2020. Malaysian economic growth momentum in Q1 2020 could be negatively impacted by significantly weaker Chinese tourist visits as well as weaker new orders from China for manufactures and raw materials, due to significant disruption of Chinese industrial production during February. Chinese tourism has become increasingly important for Malaysia's tourism industry, with Chinese tourist visits to Malaysia having reached 2.9 million in 2018, or around 11% of total international tourist visits. However, some rebound in Chinese tourism and factory orders is expected once the coronavirus epidemic is contained.

Posted 13 February 2020 by Rajiv Biswas, Executive Director and Asia-Pacific Chief Economist, S&P Global Market Intelligence