Malaysia: Towards a gradual slowdown

5 min

In Q4 2017, Malaysian GDP rose by +5.9% y/y (down from +6.2% in Q3). Private sector demand continued to be the main growth driver (+7.4% y/y after +7.3% in Q3). Private consumption expansion remained robust at +7% y/y while investment accelerated to +9.2% y/y (from +7.9% in Q3). Public expenditures increased at a slower pace (+3.4% y/y) undermined by lower capital spending (-1.4% y/y). Exports growth moderated to +7.1% y/y in Q4 (from +11.8% in Q3). Meanwhile, inflation edged down to +3.5% y/y in Q4 from +3.6% in Q3. Looking ahead, we expect economic growth to remain robust but to lose some speed. Slower demand growth from China (accounting for 13.5% of Malaysian exports) is set to act as a drag on export revenues. Investment is set to lose some momentum due to tighter monetary policy. Against this background, we forecast full-year growth to decelerate to +5% in 2018 (from +5.9% in 2017).