KUALA LUMPUR: The Malaysian economy grew by 4.4 percent in the third quarter of 2018 with private sector activity continued to be the primary driver of growth.
According to Bank Negara Malaysia's (BNM) Economic & Financial Developments in Malaysia in the Third Quarter of 2018 report release this morning, private consumption expanded strongly following the zerorisation of Goods and Services Tax (GST) during the quarter.
On the supply side, the services and manufacturing sectors supported growth, while the mining sector continued to be affected by production shocks.
Further, the agriculture sector remained weak due to the protracted recovery from production constraints in the previous quarter.
On a quarter-on-quarter seasonally-adjusted basis, the economy grew by 1.6 percent, faster than the 0.3 percent growth in the previous quarter, the central bank noted.
Headline inflation declined to 0.5 percent in third quarter of 2018 as compared to 1.3 percent in the second quarter (2Q) of 2018, mainly reflecting the impact from the GST zerorisation.
BNM noted that the implementation of the sales and services tax (SST) beginning 1 September 2018 had a muted impact on inflation during the quarter.
Going forward, the Malaysian economy is expected to remain on a steady growth path and private sector activity will remain the key driver of growth amid the reprioritisation of public sector expenditure, BNM noted.
For the remainder of the year and going into 2019, a gradual recovery in commodity production will also provide support to growth.
The annual average headline inflation is expected to be low in 2018, mainly reflecting the impact from the GST zerorisation and the stable domestic fuel prices.
Going forward, BNM said headline inflation is expected to increase primarily due to higher projected global oil prices and the prospective floating of fuel prices.
While the impact of the consumption tax policy will contribute to higher headline inflation in 2019, it will lapse towards the end of 2019, the central bank noted.
The Quarterly Bulletin also features two articles, Escalating Trade Tensions and Potential Spillovers to Malaysia and Profile of Malaysia’s External Debt.
The first provides an updated assessment of how ongoing global trade tensions have affected trade,
investment and growth prospects for the global economy and Malaysia. while the second decomposes Malaysia’s external debt profile, details its key characteristics and outlines the risk mitigating factors.