Malaysia's Economic Growth Speeds Up Despite Oil Route - Update

By Jason Ng 

        KUALA LUMPUR, Malaysia--Malaysia's economy grew at a faster-than-expected clip in the fourth quarter, reflecting resilient domestic demand and private-sector investments that helped cushion slowing exports of the trade-reliant country.
        Gross domestic product of Asia's largest oil-and-gas exporter grew 5.8% from October through December compared with the same period last year, despite the collapse in crude prices, which are down by more than half since June. A Wall Street Journal poll of 15 economists had predicted Southeast Asia's third largest economy would expand at a median 5.0% year-over-year.
        On a seasonally adjusted basis, the economy expanded 2.0% from the third quarter, central bank data showed Thursday. The data are provisional and may be revised. The economy grew 5.6% year-over-year during the third quarter. Malaysia ended 2014 with a full-year growth of 6.0% compared with 4.7% a year earlier.
        Bank Negara Malaysia Gov. Zeti Akthar Aziz said the economy remains on a "steady growth path" driven largely by domestic demand. Moderating inflation, in part due to lower energy prices, would help lift consumption, Ms. Zeti told a news conference after the data release.
        Malaysia expects gross domestic product to expand 4.5%-5.5% this year, with inflation ranging between 2.5% and 3.5%.
        But economists cautioned of headwinds ahead.
        "While most economies in emerging Asia will benefit from the fall in oil prices, Malaysia is a key exception given its status as a big net energy exporter," Capital Economics economist Krystal Tan said. "With energy-related revenues set to take a hit, the government will have to further cut back on its spending to prevent its fiscal deficit from ballooning."
        Malaysia's government is grappling with a long-running budget deficit that has sparked criticism from global ratings firms. It has sought to reduce its reliance on the oil-and-gas sector, with total petroleum-related receipts comprising about 30% of government revenue in 2013, down from 40% in 2009.
        Malaysia's current-account surplus fell 20% in the fourth quarter. But the worst in the current account is yet to come, said Michael Wan, an economist at Credit Suisse.
        Mr. Wan said the impact from the oil rout has yet to be felt in prices of natural gas. Malaysia is the world's second largest gas exporter behind Qatar. "As such, we could very well see the current account flirting in deficit territory over the second and third quarter," Mr. Wan said.
        Write to Jason Ng at jason.ng@wsj.com
        (END) Dow Jones Newswires

        February 12, 2015 03:19 ET (08:19 GMT)

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