‘Malaysia’s economy on solid footing into 2014’
POSITIVE DATA: 5pc Q3 growth shows acceleration is set continue, say experts
THE local economy, which posted a five per cent annualised growth in the third quarter, will continue to accelerate in the fourth quarter, placing it on a solid footing into 2014.
According to economists, the Leading Index, a six-month forward indicator of growth expectations, suggests that the acceleration will continue.
The index rose 4.6 per cent year-on-year in September, versus 2.7 per cent in August, marking its strongest reading in 42 months since March 2010.
Standard Chartered Bank (StanChart) expects gross domestic product (GDP) growth to accelerate to 5.3 per cent in 2014 from 4.7 per cent this year.
“The increase in new company registrations, along with stronger global PMIs (Purchasing Managers’ Index), indicate a favourable outlook for the corporate sector,” commented economists Edward Lee and Jeff Ng.
Apart from the sustained increase of the Leading Index, more positive is the continued expansion of the diffusion index, which supports its outlook for the third quarter, said CIMB Investment Bank.
“Underpinning our optimism on the fourth quarter of 2013 and 2014 are consumption and investment, aided by a moderate recovery in exports,” said CMIB IB chief economist Lee Heng Guie.
The Leading Index turned around to grow by 1.4 per cent from -0.2 per cent in August, mainly driven by higher real money supply (M1), real imports of other basis precious and other non-ferrous metals and the number of new company registrations.
Also in the bag of positive data is the Coincident Index (CI), which picked up to 2.8 per cent from 2.4 per cent in August. It was largely supported by a rise in capacity utilisation and real salaries and wages in the manufacturing sector and volume index of retail trade.
Lee said underpinning the positive outlook for the fourth quarter of 2013 and 2014 is robust domestic demand, with consumer spending supported by RM4.9 billion of cash handouts to 14.6 million households and bonus payouts of RM2.2 billion to 1.4 million civil servants.
The vigorous implementation of Economic Transformation Programme projects is propping up investment and a gradual recovery in exports will also boost outlook.
A widening balance of payments surplus (RM11.8 billion) and a current account (CA) surplus (RM9.8 billion) should help to ease concerns about the possible risk of twin deficits, commented CIMB.
“The avoidance of a CA deficit should lessen the pressure on the ringgit and sovereign-bond yields.”
CIMB also expects Malaysia’s current account to remain in surplus, estimated to total RM40.8 billion, or 4.2 per cent, of the GDP. This compared with RM26.3 billion, or 2.7 per cent, of GDP previously.
It also revised its CA surplus to 3.3 per cent of GDP for 2014 and two per cent for 2015.
StanChart also expects the current account to continue to recover given the gradually improving external picture.
It has maintained its 2013 current account surplus forecast of 3.6 per cent of GDP, which is still weaker than 6.4 per cent in 2012.
“The current account improvement was largely driven by the goods surplus, which rose to RM25.7 billion in the third quarter from RM18.7 billion in the second quarter. This is in line with exports, which rose 7.4 per cent year-on-year in the third quarter.”
Read more: ‘Malaysia’s economy on solid footing into 2014‘
