Slowing but growing, Q2 GDP at 4 percent

Q2 GDP growth for Malaysia is 4 percent. As they say, there’s always two sides to a coin. This is even lower than Q1 which was at 4.2 percent but 4 percent meant that the economy continues chugging along, slowly. Our new Bank Negara Governor Datuk Muhammad Ibrahim said, “All sectors saw growth except for agriculture, which continued to shrink due to the lagged impact of the El Nino drought on crude palm oil output. The growth in the services sector was underpinned by stronger household spending while factory performance was supported by the electronics and electrical cluster.” In brief, not too bad at all.

Net exports have fallen and is now at 7 percent compared to 11.1 percent a year ago. The saving grace was stronger consumption in the domestic economy. Private consumption grew by 6.3 per cent compared with 4.6 per cent previously. This was helped by the Hari Raya Aidilfitri special assistance to civil servants and pensioners, in addition to the BR1M payout to the deserving. In the private sector, employees who reduced their Employees Provident Fund contributions to 8 per cent from 11 per cent, have more disposable income for their daily expenses.

One important note is that the the liquidity conditions remained supportive of the financial needs of businesses and households. Even as the economy continue to adjust to higher costs of living, the impact on financial institutions’ earnings and asset quality has been modest. He said that he is cautiously optimistic that H2 2016 would be better than H1 2016. This will be supported by higher salary for civil servants and minimum wages in the private sector, continued execution of infrastructure project and higher palm oil output.

Personally, I think the Malaysian economy is still doing fine despite all the circumstances both internal and external. Yes, many developers are struggling to sell homes, many car manufacturers are struggling to sell cars and many malls are struggling to survive. However, it’s equally true that most banks continue to report good profits, many BURSA listed companies are undervalued and the car parks in popular malls remain full during weekends. This is the reason why growth is only at 4 percent. Imagine if everything was positive…. Oh yeah, Malaysia is definitely NOT in a recession. Happy following and of course, do continue spending. 🙂

written on 13 Aug 2016

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