By BERNAMA
Malaysia’s GDP expanded by 4.1 percent in the first quarter this year amid the weaker external environment, compared with 5.1 percent in the same quarter 2012 and 6.5 percent in the fourth quarter.
Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said the GDP was supported by stronger domestic demand that expanded by 8.2 percent during the quarter.
“Domestic demand remain robust, growing by 8.2 percent during the quarter compared with 7.8 percent in the fourth quarter last year,” she told a press conference on the country’s economic performance today.
She said based on current assumptions, the country would achieve 5.0-6.0 percent growth this year.
“The growth for the year as a whole is still within earlier projection of five to six percent,” she said.
Zeti said the growth in public consumption, however, moderated to 0.1 percent (4Q 2012: 1.2 percent) amid lower spending on supplies and services.
On the supply side, growth in the manufacturing sector slowed, weighed down by the weak external conditions, she said.
Despite the weakness in trade-related activities, Zeti said the services sector continued to expand, driven largely by sub-sectors catering to the domestic market.
She said growth in the agriculture sector was sustained on account of higher production of palm oil while the mining sector declined due to lower production of crude oil.
In the construction sector, she said, the growth remained firm, led mainly by progress in the civil engineering sub-sector. In the external sector, Zeti said current account surplus narrowed in the first quarter to RM8.7 billion, equivalent to 3.9 percent of GNI, due to a lower goods surplus, as well as a larger services deficit and income outflows.
“The financial account turned around to record a net inflow of RM1 billion (4Q 2012: -RM10.3 billion) as inflows arising from direct and portfolio investment from non-residents outweighed outflows arising from direct and portfolio investment undertaken by residents,” she said.
She said the balance of payments recorded a surplus of RM4 billion (4Q 2012: +RM5.9 billion).
On inflation, Zeti said the central bank was monitoring both growth and inflation risks at this point in time and believed that current interest rates were supporting growth.
“We are monitoring these very closely because the external risk will most likely affect growth on the downside. We have not seen sustainable recovery emerging from major economies,” she said.
The headline inflation rate, as measured by the annual change in Consumer Price Index (CPI), was slightly higher at 1.5 per cent in the first quarter (4Q 2012: 1.3 percent).
Asked on the strengthening of the ringgit, Zeti said that was driven by capital flows because at one time there was no significant inflow as portfolio managers stayed on the sidelines and other regional currencies seemed to be moving faster than the ringgit.
“But more recently, we have seen these potential investors who have been on the sidelines coming in a significant way and our currencies have appreciated to about the extent of other regional currencies,” she said.
Despite the continued volatility in the global financial markets, Zeti said financial stability remained intact throughout the quarter.
She said the effective financial intermediation was supported by sound financial institutions, orderly financial market conditions and sustained confidence in the financial system.
“Going forward, the global economy is expected to continue to expand, but downside risks to growth will remain.
“In advanced economies, economic recovery continues to be vulnerable to policy uncertainties and the risk of contagion,” she said.
Zeti said the divergent policies across regions were also resulting in spillover effects on global financial conditions.
For Asia, growth would continue to be sustained by domestic demand, underpinned by income growth and healthy labour market conditions and supported by continued policy flexibility, she added.
– BERNAMA
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