Pick-up in Malaysia Q3 growth seen

A Business Times poll expects the economy to grow by an average of 4.95 per cent in the third quarter from 4.0 per cent in the second.
The Malaysian economy is likely to accelerate in the third quarter,driven by firm domestic activities. But economists continue to keep one eye on the manufacturing sector and trade in the coming months as they could be hit by sluggish demand in rich countries.

A Business Times poll expects the economy to grow by an average of 4.95 per cent in the third quarter from 4.0 per cent in the second.

The government thinks the economy could grow by 5 per cent this year, the lower end of its forecast. However, economists expect a 4.68 per cent growth in 2011 and 4.5 per cent in 2012.

Bank Negara will release details this afternoon.

For the July-September quarter, the domestic engine will remain the key driver of the economy with underlying demand from abroad
still holding up, said DBS Bank economist Irvin Seah.

Exports continue to surprise as commodity prices stay firm.

“Plainly, pockets of uncertainty remain on the external front but the domestic engines of the economy are not showing any sign of stalling.

“Domestic consumption is expected to remain robust while investment will be the key driver of growth in the third quarter and going forward,” he said.

The “healthy pipeline” of development projects will continue to propel the economy.

Citi said services and domestic demand, especially consumption, are holding up well with a modest acceleration in consumer
spending in the third quarter.

CIMB Investment Bank’s chief economist Lee Heng Guie says some of the constraints on output such as post-quake supply chain problems are being lifted gradually while mining output is also contracting by a slower degree.

His estimation is supported by an export value which is rising due to firm commodity prices and a low base.

“Stronger exports and improved industrial output will lift the third quarter growth but a strong growth in the fourth quarter and first half of 2012 is not in the offing,” he said,
attributing it to external headwinds, especially supply chain snags from worsening floods in Thailand.

AmResearch’s director of economic research Manokaran Mottain also remains wary about trade and manufacturing in the
months to come.

“The anticipated stronger growth in the third quarter will indicate that it is unlikely that Malaysia will enter a recession in the short term but the possibility of the economy
underperforming in the medium term has increased, given the softening of external demand following the higher recession risks
in the OECD countries.”

He said the jump in exports for the past few months was due to sustained increases in demand from Southeast Asia and China. (Business Times)