ECONOMIC AND FINANCIAL DEVELOPMENTS IN MALAYSIA
IN THE SECOND QUARTER OF 2019
The Malaysian economy grew by 4.9% in the second quarter of 2019
The economy recorded a stronger growth of 4.9% in the second quarter (1Q
2019: 4.5%), supported by higher household spending and private investment.
On the supply side, the mining sector rebounded, driven mainly by the
recovery in natural gas output. Growth in the manufacturing sector improved
marginally, supported by better performance of the domestic-oriented
industries. Services sector continued to expand amid sustained growth in the
wholesale and retail trade subsector. On a quarter-on-quarter seasonally-
adjusted basis, the economy grew by 1.0%.
For the quarter, headline inflation averaged higher mainly reflecting the lapse
in the impact of the Goods and Services Tax (GST) zerorisation that was
implemented in June 2018. Core inflation, excluding the impact of
consumption tax policy changes, was unchanged at 1.6%.
Exchange rate developments
In the second quarter, the ringgit depreciated by 1.5% against the US dollar
driven mainly by non-resident portfolio outflows as investor sentiments
remained subdued amid softening global growth outlook and escalations in
global trade tensions. These uncertainties remained elevated and continued
to dampen investors’ risk-appetite towards regional financial markets,
including Malaysia. From 1 July to 15 August, the ringgit depreciated by 1.2%
against the US dollar. For the year to date, the ringgit has depreciated by
1.3% against the US dollar, in line with most regional currencies. Going
forward, the confluence of global factors will continue to have bearing on the
movements of regional currencies, including the ringgit.
Overall financing conditions are consistent with the current pace of economic
expansion, with demand for financing showing some signs of improvement
given higher loan applications during the quarter. Steady loan disbursements
across segments, including for SMEs and purchase of houses, continued to
support economic activity.
Going forward, the Malaysian economy is expected to remain on a
steady growth path Growth is expected to remain supported by private sector activity. The
external sector is likely to continue to be affected by slower global growth
amid ongoing trade tensions. Overall, the baseline projection is for the
Malaysian economy to grow between 4.3% – 4.8% for the year.
Headline inflation in the second half of 2019 is expected to average higher
compared to the first half following the lapse in the impact of consumption tax
policy changes. Underlying inflation is expected to remain stable, supported
by the continued expansion in economic activity and in the absence of strong