KUALA LUMPUR: Malaysia's economy expanded 4.7 per cent in the fourth quarter 2018 on resilient private sector activities and positive growth of net exports.
Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus said the services sector was supported by continued strength in consumer spending particularly in the retail segment while the manufacturing sector was driven by the electronics and electrical (E&E) and consumer related clusters.
Commodities-related sectors continued to recover from production disruptions experienced since the second quarter with higher growth in the mining and agricultural sectors.
"We see a trend moderation to the economy after an exceptionally strong performance in 2017 and one-off impacts such as supply-side shocks and post-elections policy uncertainty.
"Among the factors influencing 2018 economic growth were resilient private sector spending, lift from net exports and continued expansion in the services and manufacturing sectors.
"However, there were disruptions in commodity-related sectors in the second and third quarter 2018 as well as government spending rationalisation which impacted the economy," she said in the fourth quarter economic briefing with the media today.
Going forward, Shamsiah said the economy is set on a steady growth path with private sector demand expected to remain the key driver amid continuing fiscal rationalisation.
"Private sector demand is expected to remain the main driver of growth amid continuing fiscal rationalisation while external sector is likely to soften with moderating global demand.
"Headline inflation is expected to average moderately higher. The impact of the consumption tax policy on headline inflation in 2019 will start to lapse towards the end of the year.
"Underlying inflation, which excludes the impact of the changes in consumption tax policy, is expected to be broadly stable in 2019 in the absence of strong demand pressure," she added.
With the 4.7 per cent growth, Malaysia's gross domestic product (GDP) is now valued at RM1.23 trillion at constant prices and RM1.43 trillion at current prices.
The current account is expected to remain in surplus as there will be continued goods surplus from continued global demand and support from commodity exports.
The services and income accounts will remain in deficit on continued reliance on foreign service providers and sizable income accrued to foreign investors.
"FDI inflows were also seen improved to RM12.9 billion in the fourth quarter 2018 and were broad-based mainly channeled into the manufacturing and non-financial services sectors.
"Advanced economies including the Netherlands, Japan, and Hong Kong were the largest contributors of FDI," she added.
Meanwhile, Shamsiah said headline inflation averaged 1.0 per cent as it declined in the fourth quarter due to transport inflation turning negative.
"In 2019, inflation is expected to average moderately higher as impact of the consumption tax policy will start to lapse towards the end of the year subject to risks related to global oil prices.
"The overnight policy rate will be maintained at 3.25 per cent as our stance of monetary policy remains accommodative and supportive of economic activity.
"The Monetary Policy Council will continue to assess if there are any shifts to the balance of risks to the outlook for domestic growth and inflation," said Shamsiah.
On the ringgit, Shamsiah said it depreciated by 1.8 per cent against US dollar in 2018 in line with most regional currencies but appreciated 1.5 per cent in 2019.
"We expect external uncertainties will continue to affect the ringgit outlook as well as uncertainties surrounding US monetary policy normalisation, softening of global growth outlook and development surrounding global trade and protectionism," she added.